Netflix and Starz Entertainment have broken off renewal talks … or did they?
The announcement that the companies had ceased attempts to reach a deal over a cache of high-profile titles from Walt Disney Studios and Sony Pictures was met with considerable skepticism among Wall Streeters, many of whom held out hope a deal could still be done.
“While on the surface both parties appear focused on moving on with their respective businesses, we are not so sure this is really the end of their relationship,” said Richard Greenfield of BTIG Research.
At least four different analysts posited that Starz’s Thursday move was a negotiation ploy, noting that Liberty Media’s disclosure was conveniently timed to the day Netflix instituted its controversial price hike. Just as the streaming service was forcing subscribers to absorb a 60% increase for the privilege of streaming and mail delivery, those who would elect to stream alone would be faced by less quality product.
“It is premature to write this deal off permanently; we think it is far more likely that the timing of this announcement…will bring Netflix back to the bargaining table in short order,” said Wedbush Securities analyst Michael Pachter.
Netflix’s stock got hit harder than Liberty on Friday, dropping 8.6% to $213.11. Liberty was down 1.7% to $66.18.
Dueling statements Thursday from Starz CEO Chris Albrecht and Netflix CEO Reed Hastings were remarkably free of bile given that they were ending long-standing talks that could have seen $200 million-$300 million changing hands.
The conspiracy theories flew Friday amid a Bloomberg report that Dish Network was preparing to go after Netflix with a rival subscription VOD service to be launched next month under its new Blockbuster brand. The report also suggested some unspecified Starz content would be part of the new offering.
Analysts also speculated that a more modest deal could still be struck between Netflix and Starz, possibly for less content than the 1,000 titles covered under the initial deal signed in 2008. “We had foreseen the new deal involving less content, and that could still happen,” said Barton Crockett, analyst with Lazard Capital Markets. Netflix could go also around Starz and secure films from Sony and Disney directly, albeit in a later window.
In other Netflix news, Piper Jaffray analyst Michael Olson noted that Netflix could be on the verge of shifting the focus to the international front. He cited sources that the streaming service was going to make an announcement Monday in Sao Paolo, Brazil, that would offer more detail on its plans for its entry into the Latin American market.