In what has to be rather big blow to Netflix Starz has ceased contract negotiations with Netflix. This means that once the contract expires in February 2012 there will be no more Starz movies streaming on Netflix. Although this is certainly not a death toll for Netflix it is not good at all. Starz has rights to both Disney and Sony content which makes their contribution somewhat large to the Netflix catalog.
As you can imagine the issue is the amount of money that is changing hands over the deal. Although the exact amount is not known to anyone other than Starz and Netflix there are some estimates that put the amount at around $300 Million to renew for the next four years. This is an amount that Netflix just cannot afford to pay.
As we mentioned above this does not mean the death of Netflix, it only means that they will have to come to some sort of compromise. As both Netflix and Starz need each other we are sure this will happen but the exact details of this (or any) compromise is guess work. We would suspect a reduced number in return for more restrictive content rules. This would be similar to when Starz pull their Sony content because Netflix had reached the total number of views for those titles.
The Netflix of next year might not be the same as what we were seeing even last month. If the content dries up they will not be able to justify the price increases and they will lose customers. Conversely if they pay the higher amount to keep the content and raise their prices more they will lose customers that do not want to pay that high of a price for a streaming service. To put it bluntly Netflix is between a rock and a hard place…
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It looks like the days of free internet TV are coming to a close as the big media companies work to push people back to the tether of cable or other pay services. This should not come as a shock to anyone at all really. After all none of the media companies want you to have access to these shows/movies in a format that they cannot control. We have seen this type of move before with the Music Industry and with the current crop of media giants. The movie and TV companies still have a problem letting go and giving people access over the scary internet. The problem is one of money (it always is); the powers that be are a tad greedy and cannot see how they can make enough if they just allow access to these shows for free…
We have heard that Netflix is changing their pricing in September. We suspected as much after they screwed up their authorization algorithm a few weeks before and kicked all of the Media Center PCs and a few Boxiees out for a few days. The new setup allows them better control and monitoring over their clients who chose to stream content and also provides for better protection against copying the video stream when using a Windows Media Center PC. Of course our initial belief that Netflix was going to begin charging more for people with extended capabilities (like Media Center) did not emerge we still think that Netflix may have had this in mind.