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Netflix Loses Starz Content as Prices Increase

Is this a significant loss for Netflix? How angry are subscribers?

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Netflix Loses Starz Content as Prices Increase
[ Business]

Two interesting things just happened in the world of Netflix. First, those much-talked-about and generally despised price changes went into effect. Second, Netflix lost all of its Starz content.

Starz called off talks in the contract renewal process, leaving Netflix without one of its largest providers of newer content. This collapse in negotiations takes away Netflix’s ability to offer newer movies from Walt Disney Co. and Sony, both of which have their distribution controlled by Starz.

According to the Wall Street Journal, an inside source claims that Starz wanted Netflix to pay them 10 times the licensing fee that Netflix paid them in 2008. Netflix offered the premium TV network $300 million plus a year to renew the agreement, but Starz declined.

What do you plan to do to meet your streaming video needs, now that Netflix has changed their prices and lost Starz? Let us know in the comments.

Apparently, what Starz wanted was a tiered pricing system which would have Netflix customers pay more than the baseline $7.99 streaming price in order to access additional content from Starz. No dice, said Netflix.

Here’s what Starz said about the failed negotiations in a release –

Starz Entertainment has ended contract renewal negotiations with Netflix. When the agreement expires on February 28, 2012, Starz will cease to distribute its content on the Netflix streaming platform. This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content. With our current studio rights and growing original programming presence, the network is in an excellent position to evaluate new opportunities and expand its overall business.

Netflix CEO Reed Hastings talked to Business Insider about the deal, saying that he “regrets their decision to let out agreement lapse.”

He went on to say that Starz doesn’t account for that much of Netflix’s content anymore –

Because we’ve licensed so much other great content, Starz content is now down to about 8% of domestic Netflix subscribers’ viewing. As we add a huge more content in Q4, we expect Starz content to naturally drift down to 5-6% of domestic viewing in Q1. We are confident we can take the money we had earmarked for Starz renewal next year, and spend it with other content providers to maintain or even improve the Netflix experience.

Shares of Netflix fell 10% Thursday night before closing.

The price change that went into effect on Sept. 1st, the same day of the collapse of the Starz deal, splits up the streaming service and DVD-delivery service into two different plans, both costing $7.99. That’s a total of $15.98 if you want to keep both plans. Before, streaming was $7.99 but the 1-DVD-at-a-time service was only a $2 add-on to that package, making it $9.99 total.

This announcement back in July didn’t go over too well, as the internet community threw a collective fit.

So, the most basic description of the day’s events is as follows: Netflix upped their prices and lost content at the same time. That’s a bummer, right?

The Reed Hastings argument, basically, is that the loss of Starz isn’t going to hurt Netflix at all. If Starz only accounts for 8% of the content that subscribers are watching on a regular basis, it’s true that Netflix isn’t going to be absolutely crippled by this loss. That statement becomes even more compelling if his projections are correct and Starz ends up accounting for only 5-6% of viewed content in Q1 2012.

But you have to consider what Netflix loses when it loses Starz: newer releases – Disney and Sony stuff. This is not the kind of stuff that resides in the outer regions of the library or stuff that will collect dust in a queue for months – this is popular stuff that people want to watch.

And even if Starz didn’t provide the most premium content, subscribers may have a legitimate reason to be perturbed. Isn’t any loss of content, especially 8% of the content watched, unacceptable?

Hastings said that they will take the $300 that they were going to give to Starz and use it to snatch up different content. But do subscribers want new content to replace lost content? Or do they want new content to add the all the existing content. I think I’ll bank on the latter.

It is important to remember through all of this, that the price you pay for your Netflix subscription doesn’t have to increase. If you choose to go streaming only, your monthly fee will actually go down. It’s only if you really want the physical DVDs that you’ll see a real price hike.

But on a day where many existing Netflix users feel forced into a streaming-only decision, Netflix announces that a lot of important streaming content (all the Starz play stuff) will be going away.

How do you feel about Netflix losing it’s deal with Starz? Do you think that it will have a significant negative effect on the company? Let us know in the comments.

Netflix Loses Starz Content as Prices Increase
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  • George Anne Thomas

    THANK YOU Netflix! In this time of economic crisis, it is nice to know some businesses are saying NO! Enough is enough. We are trying to recover, not force more into financial misfortune, causing more customers to bail from services.

  • John

    Thanks Netflix, I wouldn’t have paid more, I would have canceled. You did the right thing. Since I haven’t gotten a raise in 5 years, I couldn’t pay more even if I wanted to.

  • http://hiproductions.com Andrew

    Great article Josh. It seems to me that Netflix has adopted the same business model as Aetna Insurance: Increase the monthly premium by 50% and reduce coverage by 10%. Only for Netflix it is increase the service fees by 40% and decrease the offering by 8%. Its strange but I am most annoyed with Starz. They are greedy greedy greedy. They are making great money with Netflix and just want to make evil money and pass that increase on to the consumer, Of which: 1 out of 10 are out of work and nearly a third are underemployed and looked to Netflix for an affordable entertainment model in comparison to overpriced cable and satellite. So long Starz…I learn to live my life without you.

  • http://www.raidersonlineshop.com Oakland Raiders Jersey

    In this time of economic crisis.

    i don’t like the Netflix,I have canceled my Netflix,

    i would like to choose starz!

  • Jennifer

    I am going to cancel netflix. It is obvious that they are so arrogant they feel they can do whatever they like and we will keep paying. I know for a fact that most of the movies that are worth watching come from Starz, the rest of the time you are searching through awful movies trying to find anything worth watching. All I need is hulu and redbox. You can get new movies faster from Redbox anyway.

  • Elle Smith Fagan

    this is not good news – it sounds like Netflix has hit a bad patch.
    I do not know what I am going to do. I enjoy my Netflix choices but they are choking in an unhappy dynamic – BOTTOM LINE? I am a jogging bizlady 64 and plan to stay at work for a while , as long as it feeds me.

    I CLEARLY RECALL THIRTY YEARS AGO WHEN CABLE AND TODAY’S VIDEO OFFERINGS BEGAN – we were promised a lovely list of things that vaporized as soon as they had our first checks in hand. There games that happen as these providers of media “rassle around” are more interesting than their programming. It can all be free, though I am no “Commie”…and I do not mind paying if the quality of the experience is high – captions , quality audio and video, and streamlined navigation and options galore.

    I will wait and see with Netflix…they have been clever in the past, so maybe they will save it all yet! I know I love my streaming/ watch instantly. I have a busy schedule and do not always know, myself, if will be able to watch a particular film. Other times, a documentary etc..is JUST the thing I need to research a work project..so “watch instantly” makes it work for me.

    Let’s see what they do.

    e.

  • Random Wesy

    Seems brutally unfair- many,many people- myself included- kept up with the Netflix increase, and now we find that 8% (and I bet it’s more) of the content will be unavailable. It is likely these same people- as evidenced in other comments- will drop Netflix.

  • http://thecondoexperts.info agnes donnadieu

    Netflix now sucks! I have been with Netflix for a year now and I watch movies every day on my computer. They have done many mistakes besides losing STARZ content and increasing prices. The website is absolutely not functional. The search for movies is less friendly. I talked to the people at Netflix and they told me that they did receive a lot of complaints but Netflix did not give a damn obviously. Also their new arrival section is often a bunch old movies that nobody wants to see. I don’t think they will last much more longer.

  • Steve

    I am still happy with netflix with the rate increase as the streaming is still worth it to me as I watch alot of older television shows that I have not had the oppurtunity to watch in the past due to deployments or work. My question is this simply posed from a happy customer. If there is the rate increase, with the loss of Starz, what is NETFLIX doing to improve there content? Again not being negative or hostile, just a sincere question, and would like educated answers not some angry rant.

  • Kat

    I’m glad that Netflix did not allow itself to be blackmailed by Starz. Yes, I would like to continue to get Starz content, but if they are going to be so greedy as to force Netflix to raise their prices even more, then I will boycott Starz anyway. And if there is something I really want to watch from Starz, then I will rent it from another source. The corporate greed Starz is displaying is a lot of what is wrong with our country, and if I had to go without Starz programming forever, then I don’t have a problem with that.

  • http://www.parrotadoptontario.com Nancy Daniels

    Netflix is a joke anyway. They are charging people for a service that most of the Television Networks are offering for free and you can even see more up to date episodes for free through the networks! As for their movie options, unless you are in to old outdated movies, its hardly worth the money.

  • http://www.bing.com/ Gerry

    You’ve got to be kidding me—it’s so tarnspanrelty clear now!

  • http://rqgwypdcghqz.com/ tsnmgsf

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