The hits continue to come for beleaguered online video provider Netflix, which, amidst unpopular price hikes, is now losing the support of cable network Starz Entertainment, its leading supplier of new and recently released movies. As a result, the streaming digital TV and film service will soon be deprived of top shows like Party Down and Spartacus: Blood and Sand, plus new movies from Sony Pictures and Walt Disney Studios.
News comes on the heels of failed talks to extend a distribution deal with Starz that ends on February 28th, 2012, which allegedly faltered given Tinseltown’s growing unease over online video’s impact on its bottom line. Despite Netflix’s reported offer of over $300 million per year to renew the deal, roughly 10-times more than current licensing terms, the proposal was ostensibly rejected due to the cable network’s growing fears surrounding TV audiences cutting subscriptions. Fearing a decline in viewership for its broadcast and DVD offerings and growing shift towards payment for Netflix’s services, Starz chose to terminate talks, sending Netflix stock plummeting 9% in after-hours trading following the announcement.
"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," Starz said in a surprisingly chilly public statement. "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."
Critics have opined that industry trends were more troubling to the network than pure financials, with Starz executives loath to cannibalize TV and home video audiences by making thousands of films available for casual online viewing. According to industry analysts, despite Netflix’s 25 million-strong subscriber base, the broadcast provider saw little upside in continuing to make over 1000 films including Tangled and Superbad available for on-demand digital access. Initially the province of a small group of technophiles when the original distribution deal was struck in 2008, streaming video has since become a pop culture juggernaut, fueled by the growth of smartphones and connected home entertainment devices. Given Netflix’s $8/month pricing, a fraction of cable TV subscription costs, Hollywood insiders have come to fear the service’s growing influence in recent months.
A major source of new and classic movies such as Prince of Persia and 8 Mile, the deal’s failure to new ultimately looks to deprive Netflix subscribers of hundreds of popular titles, and significantly deplete the service’s catalogue. Troubles couldn’t come at a worse time for the service, which just began rolling out its controversial new subscription plans.