With the announcement this afternoon that Netflix is going to lose its programming from Starz, it’s worth exploring what change this will have on movie watching habits. While the dollar figures might be of interest for Netflix’ investors, what we on the entertainment side want to know is: How many movies will we lose from the library.
Under the Starz deal, Netflix gets about 1,000 movies including some from Starz partners Sony and Disney. It’s because of the Starz deal that some Pixar films are available for streaming. Starz also provides some 1,500 TV episodes and “other types of content”.
Netflix has been streaming since 2008, but in the early stages it didn’t amount to much. This of course was before Roku, Xbox, Apple TV and PS3 were offering streaming to your television. Now an $8 Netflix account is almost key to optimizing your entertainment system.
It’s been known for some time that many of Netflix’ contracts were up in 2011-12. There was a scare earlier this year where Fox and Universal were going to pull their Netflix content, until they used their leverage to get a 28 day waiting period for new releases. However, Starz came to the negotiation table for a different angle.
Studios like Starz want “pricing parity” in a new contract, which means Netflix will be paying what the pay-TV networks are charged to air the same titles. To put it in perspective, Netflix got the Starz streaming deal for $30 million. Epstein explains this was 1/20th of what someone like HBO pays. When this math is factored into all of the Netflix studio deals, it means the company is looking at paying over half a billion dollars more per year for the right to stream movies.
Basically, Netflix three years ago was able to negotiate as a small niche company. Now that they’re a huge success, their competitors want them to play by the same rules they do. Similar pieces have been written on AMC, how the TV channel and studio has found out the drastic changes that occur when a hit becomes a franchise.
What does it all mean? When Netflix raised their prices, it almost caused Twitter to meltdown. I don’t think they’re done. I think Netflix is going to eventually have to charge prices on the level of HBO and Showtime, which are $20 a month packages. The idea of getting access to millions of hours of content for just $5 a month was a bit too good too be true.
Those ideas usually are. But what do you think? Would you stick with Netflix for the convenience, even if it costs as much as pay cable? Or is the low price point Netflix’ only selling point?