Starz, Netflix And How Industry Jealousies Strangle A Golden Goose
from the we'll-see dept
In a somewhat surprising move, Starz has decided to not renew its contract with Netflix. Many other TV channels and movie studios are sure to follow as their current contracts end. Even though Netflix is somewhat braced for this, Starz was one of the few providers willing to supply newer titles, thanks to its deals with Disney and Sony Pictures. Not only that, but Netflix's licensing deal with Starz was somewhat of a coup with its bargain-basement price tag ($30 million) which helped it get its streaming service off the ground. While this loss will probably adversely affect Netflix in the short term, in the long term it may have more of an effect on Starz.According to Starz CEO Chris Albrecht:
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.In between all the jargon, there's a message: Netflix isn't willing to pay us what we think our content is worth. Unfortunately for Starz, it may soon find out that Netflix was actually paying what the content was worth. In Starz' opinion, it can go elsewhere and make more. More accurately, Starz just has to go somewhere else.
Despite the fact that Netflix has offered $300 million for continued access to Starz content, it wasn't enough for those swimming upstream of the cable channel. In all likelihood, $300 million would have been plenty except for the uncomfortable fact that Netflix is beating cable television at its own game. Pressure from Liberty Media (which owns Starz and invests in Time Warner Cable) to create a new, higher priced tier for Starz very likely killed the deal:
[R]epresentatives for the cable network owned by John Malone's Liberty Media were insistent that Netflix create a new "tier" for subscribers who wanted its movies at a higher price than the $7.99 it currently charges for online video. That would have put Netflix more in line with the pricing of cable and satellite companies, a step the video company apparently wasn't willing to take.Unfortunately for Netflix and its customers, the content providers seem to think that they can reset the clock back to a "simpler" time by withholding new releases in order to drum up plastic disc sales or, in the case of Liberty Media, turning its content into a "premium" in an effort to shore up its flagging subscriber base.
"Starz could have taken a check from Netflix, but there would have been pushback from cable and satellite operators and its studio partners," said analyst Tony Wible of Janney Montgomery Scott.
This all points to an incredible level of arrogance on the part of the content providers. First off, they assume the public cares about release dates, exclusive licensing deals and PPV windows. I can assure you that the public could not give less of a shit about when, where and how the content providers release their movies and TV shows. Secondly, they do everything in their power to turn back the clock to captive audiences, tied to a single television and handcuffed to a single cable box.
The public just wants access to the content in its most convenient (to them) form. The game has changed (thanks to Netflix and others) and no one feels compelled to deal with one service only for their entertainment. Liberty Media may think it can set the price for its content to whatever dollar amount is best for it, but consumers have given no indication that they like sudden price increases. In fact, consumers are finding cable to be less and less essential thanks to services like Netflix, but rather than learn from the past, content providers seem to think that new media has to play by old media's rules and consquently, swiftly ruin everything they touch.
These members of the entertainment industry also seem to forget the file-sharing elephant in the room. (Perhaps it's because Industry-Vision™ corrective lenses render this animal as a "scapegoat.") If this short-sighted pursuit of DVD sales and PPV income continues, they're going to find customers fleeing to "content providers" who can give them what they want when they want it, all at a price the entertainment industry can't afford. And instead of being able to collect "too little," they'll be collecting nothing at all.
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Filed Under: dowloads, movies, streaming
Companies: liberty media, netflix, starz
Reader Comments
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I want to watch any show or movie ever made, whenever I want to, and wherever I want to. This is in no way an unreasonable desire- it's been technologically feasible for half a decade. To satisfy my want for a particular show or movie, I'm willing to pay with money to Netflix (or by sitting through ads on Hulu) in exchange for convenient delivery. Or less preferably, pay with my time by hunting down unauthorized versions. And if I can't pay with money and I don't have time, then I just don't watch it all.
Those are my three ways of consuming media, only one results in money going to producers. Not everyone has cut their cord yet, but I know my behavior is not unique.
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Netflix has plans to license and produce their own content and I think they've been kind of slow to make it happen for fear of scaring the other guys away. It'll also be interesting to see if this decision will speed up Netflix's acquisition plans.
Aside; Tim, your writing continues to improve, keep it up!
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K...
I pay for Netflix. I'm going to keep paying for Netflix. I like pausing a movie on my TV and continuing to watch it on my phone whilst I drop a deuce.
Everything Netflix used to get from Starz that I wanted to watch or will want to watch will probably be obtained via torrents (I can do that on my phone, too), now. Going out of my way to exprerience their content isn't necessary. So...in an effort to preserve their brand and the value of some other shit, they essentially just lost my business. What?
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Re: K...
They sure are working to remove the "highly valuable" part of their content by making it extra "exclusive" too.
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I wish companies would give up on the whole idea of "branding", because I hate remembering that stupid name.
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One day I got to thinking about cutting expenses and looking around it dawned on me that I wasn't getting the entertainment value I expected from pay for view.
It was a noise maker for background noise. There were not but maybe two or three shows tops per month I would look forward to. The rest of the time, with all those channels there was nothing worth watching.
I have no interest in reality shows that are anything but reality. I have no interest in soaps. Humor shows are geared to the lowest common denomination and an insult to intelligence. It's really gotten bad when you have to have canned laughter to tell you where the punch line is. Don't care for sports. No one needs to be filled in on the rerun practice where over 1/2 your paid for view time is filled with repeats.
In a nut shell, it wasn't worth the money then. Crap that's been near 10 years ago I cut the cord.
I did for a while rent movies but they too got expensive over time. Priced themselves right out of the market for me.
I have caps recently put in place by my provider. So watching movies streamed over the net is out.
One thing is for sure, I'm not going back to tv and I won't be renting movies on the disk.
Most of my decisions were economically driven with a few exceptions.
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Arrrggg me hearties!
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It Almost Looks Like They Want Us to Pirate Their Content
I mean seriously, I already dropped my Netflix down to streaming only after the price hike. Now they're gonna start losing streaming content, I'll just cancel my account altogether and get my content elsewhere.
$300 million wasn't enough so now they'll get $0? In what business school do they teach that as a sound business practice? Why do these media companies believe they can charge customers more to get what they already had?
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Re: It Almost Looks Like They Want Us to Pirate Their Content
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Re: It Almost Looks Like They Want Us to Pirate Their Content
I believe it's called the "You Have a Government-Enforced Monopoly for 70+ Years School of Business."
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The value of Starz to a consumer...
So, I believe that equals out to, I'll only watch it if you pay me.
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"all at a price the entertainment industry can't afford"
What happened that overturned:
"Saying You Can’t Compete With Free Is Saying You Can’t Compete Period"?
Because you've just undercut Mike...
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Re: "all at a price the entertainment industry can't afford"
I'm having a hard time following your argument here and a lot of that is due to cherry-picking. But... let's go ahead and attempt to have a discussion.
Producing content carries costs. Agreed.
Piracy does not create more costs. Piracy may affect the content creator's chances to recoup their costs. But! Piracy does not COST content creators a single dime. File-sharing does not create additional costs for the creators. A million people downloading a million files does NOT create additional costs for the producers. (I can keep restating the same thing, but for the sake of brevity [and redundancy], I won't.)
You're still trying to argue your original argument. I never stated anything about the CREATION of content being "cost-free."
(An aside: I never miss a chance to taunt an industry that will lose money, especially when the industry insists on shooting itself in the foot/face/vital organs with each successive move. I don't need to rearrange what I've said before to make this point.)
What happened that overturned:
"Saying You Can’t Compete With Free Is Saying You Can’t Compete Period"?
Because you've just undercut Mike...
Netflix competes (very successfully) with free because their service is actually simpler than the free alternative. This is why they're doing well. A low price combined with tons of convenience and options.
Starz was competing with free, but thanks to meddling from its owners, will now be trying to compete with free by removing its content from a heavily-used (and successful) service and placing it in the very same hands that managed to fuck up a potential cash cow (read: Hulu, which was also doing well competing with free) with additional constraints as to when and how (and for how long) people could stream their content.
The industry continues to undercut itself. It could have competed with free but it got greedy. $300 million (20% of Starz' yearly income) still isn't enough.
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Re: Re: "all at a price the entertainment industry can't afford"
Steam is proven. Origin is a new comer that doesn't play nice. If anything, I see the pirating of EA games making this a fiasco.
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Re: "all at a price the entertainment industry can't afford"
I'll not repeat what CLT has said already, but erm, yeah it does. That's why being able to recoup said costs is so important. Unless I've misunderstood something, Netflix were offering $300 million for said content, and they are currently the number 1 platform for accessing said content online.
Explain to me again how ditching them is a good move for the content producers, because I'm not getting it.
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No effect on me
Is it too early to say R.I.P. ?
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Re: No effect on me
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very short sided on Starz part
As for programming Starz doesn't have to much in the way of original content except say Spartacus. So as Netflix starts expanding into original programming Starz will lose out there. All the other programming is generally on HBO or Showtime first and are running the same movies so paying for Starz again just isn't worth it...
In the long run though I tend to think Starz needs Netflix, not the other way around.
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on the bright side, that's 300 million netflix can now use to get new content somewhere else.
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Buy a terabyte drive every month and copy every rented movie you ever see and you shall never have to "buy" a rented movie ever again or pay to much for streaming those things.
For live action young puppies build your own autonomous blimps and fly them overhead of stadiums and start prodcasting those funny games to the world once they find thy stream they shou be free.
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bonus denied
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best news i have heard in a long time.i hope to see more customers come back to my friend's store as he struggles to get a few more years life out of his business.
Netflix keep on raising your rates and losing studios !!!!
Awesome News !!!
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Re:
There's ways to compete with Netflix, so I'm sorry your friends hasn't though about them. Killing an international company won't bring them to his store, they're far more likely to resort to Redbox or torrents.
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Awesome News !!!
Actually by splitting the streaming from the DVD rentals apart they saved me $12. I can Red box the DVD rentals I want and still be under the $12 I'm saving per month. Good luck to your friend and his dieing business model.
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Marketing myopia
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In fact, consumers are finding cable to be less and less essential.
FTFY
Who needs TV?
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Starz dumps Netflix
Too bad.
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Pink Floyd said it best...
And now there's 300+? I quit watching TV over 10 years ago and I haven't missed it at all. There was one exception to this. I never missed an episode of BSG on the Sci-Fi Channel. Haven't watch any TV since.
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I will live with out it.
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So be it, when we want stuff Starz locked out we'll torrent, for everything else we netflix =)
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Netflix recognizes piracy
I recently canceled Netflix (because of the price hike and how they were disingenuous about it saying it was good for us). They ask for a small survey when you cancel and right there prominently on the list of reasons you are canceling is "because I intend to download via torrent". Netflix lists it point blank as an option for why, and where you intend to get your entertainment now.
I would be rather interested to see how many of those canceling select that they intend to download / torrent shows from there on out.
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Poor decisions all around.
All I have to say is they better:
A. Replace it with like content.
B. If not, lower the price for the removal of content.
I can easily go to Amazons streaming service.
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