×

Starz nixes deal with Netflix

Streaming service stock tumbles 8%

Starz Entertainment’s decision Thursday to walk away from renewal talks on a streaming deal with Netflix leaves questions as to what the next moves from both companies will be.

The original 2008 pact, which delivered more than 1,000 recently released movies to Netflix via the pay cabler’s output deals with Walt Disney Studios and Sony Pictures, was key to the emergence of the company as a dominant player in digital movie delivery.

“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 statement.

Netflix’s high-flying stock tumbled about 8% in after-hours trading Thursday. Hours after Starz announced the end of negotiations, Netflix CEO Reed Hastings minimized the impact of losing top-shelf titles from “Wall-E” to “The Social Network,” noting that they comprised only 8% of its subscribers’ digital viewing.

“We are confident we can take the money we had earmarked for Starz renewal next year, and spend it with other content providers to maintain or even improve the Netflix experience,” he said in a statement.

The prospect of a Netflix shopping spree has sent salivary glands at content companies’ everywhere into overdrive, though it remains to be seen what the Los Gatos, Calif. company is in the market for: films to compensate for the loss of Disney and Sony titles or a doubling down on TV titles.

As for Starz, the question is what it will do next with the streaming rights to its films, which could either be folded into TV Everywhere efforts or maybe even sold to a Netflix rival.

“Starz is in a very different environment now than it was when it made the deal in 2008,” said Deana Myers, a pay-TV analyst with SNL Kagan. “The MSOs are very eager to build out their own digital platforms.”

The loss of the Starz deal comes at a crucial juncture for Netflix, which on the very same day coincidentally implemented a controversial move to raise by 60% the price for subscribers who want to both rent movies by mail and streaming — a decision that could leave it newly vulnerable.

For the past year, the companies had been negotiating a renewal, which likely would have cost exponentially more than the $20 million-$30 million Netflix paid for its initial four-year deal. That pact had been seen as a steal, singlehandedly responsible for putting Netflix on the map online when it had little else to offer.

While the dissolution of the deal wasn’t entirely surprising, both Starz and Netflix execs have spoken optimistically in past months about reaching a new deal.

Starz was said to be seeking at least $200 million per year to renew the deal, a sum that Netflix CEO Reed Hastings acknowledged as reasonable. Back in May, Hastings told Charlie Rose in an interview, “We’ll try to renew with them, and, of course, that renewal if it happens will be for a lot more money.”

The current agreement expires on Feb. 28, 2012.

Sony movies had already disappeared from Netflix in June, when the studio pulled its film titles off the service due to a clause in Sony’s contract with Starz that put a cap on how much its content could be viewed online.

Liberty Media Corp.-owned Starz had already begun to take a more protective stance with Netflix in March, imposing a 90-day delay on its programming made available through the cabler’s Starz Play service. The move came just days after Showtime made a similar move, an acknowledgement of how Netflix has increasingly been perceived as a competitor to pay-TV networks.

Earlier this year, Netflix announced it was getting into the original programming business by ordering 26 episodes of “House of Cards,” an adaptation of the BBC drama set for late 2012. Media Rights Capital will produce the series, which will star Kevin Spacey and be executive produced by “The Social Network” director David Fincher.

The foray into original content has been interpreted as a hedge against the increasing selectivity among content companies regarding what movies and TV shows it will license to Netflix and other digital players. No major TV brand currently licenses Netflix streaming rights to current programming, for instance.

The collapse of deal talks could also raise the prospect that Starz is prepared to steer the movies to a Netflix rival ready to outbid. Competing subscription VOD services including Amazon may have been willing to pay a premium to land the kind of content that would make them more competitive.

The absence of the Starz deal leaves Netflix’s pact last year with Epix, which delivered streaming rights to Paramount, MGM and Lionsgate titles, as its most valuable partner on the film side of its business. That deal is estimated to have cost Netflix nearly $1 billion over five years.

Popular on Variety

More Film

  • Samuel-W.-Gelfman

    Samuel Gelfman, Roger Corman Film Producer, Dies at 88

    Samuel Gelfman, a New York producer known for his work on Roger Corman’s “Caged Heat,” “Cockfighter” and “Cannonball!,” died Thursday morning at UCLA Hospital in Westwood following complications from heart and respiratory disease, his son Peter Gelfman confirmed. He was 88. Gelfman was born in Brooklyn, New York and was raised in Caldwell New Jersey [...]

  • Margot Robbie stars in ONCE UPON

    Box Office: 'Once Upon a Time in Hollywood' Pulls Ahead of 'Hobbs & Shaw' Overseas

    Sony’s “Once Upon a Time in Hollywood” might not have hit No. 1 in North America, but Quentin Tarantino’s latest film is leading the way at the international box office, where it collected $53.7 million from 46 markets. That marks the best foreign opening of Tarantino’s career, coming in ahead of 2012’s “Django Unchained.” “Once [...]

  • Good Boys Movie

    Box Office: 'Good Boys' Leads Crowded Weekend With $21 Million

    The Bean Bag Boys, the self-appointed nickname for the trio of best friends in Universal’s “Good Boys,” are conquering much more than sixth grade. They are also leading the domestic box office, exceeding expectations and collecting $21 million on opening weekend. “Good Boys,” which screened at 3,204 North American theaters, is a much-needed win for [...]

  • Amanda Awards

    ‘Out Stealing Horses’ Tops Norway’s 2019 Amanda Awards

    HAUGESUND, Norway —  Hans Petter Moland’s sweeping literary adaptation “Out Stealing Horses” put in a dominant showing at Norway’s Amanda Awards on Saturday night, placing first with a collected five awards, including best Norwegian film. Celebrating its 35th edition this year, the Norwegian industry’s top film prize helped kick off the Haugesund Film Festival and [...]

  • Editorial use onlyMandatory Credit: Photo by

    Richard Williams, 'Who Framed Roger Rabbit' Animator, Dies at 86

    Renowned animator Richard Williams, best known for his work on “Who Framed Roger Rabbit,” died Friday at his home in Bristol, England, Variety has confirmed. He was 86. Williams was a distinguished animator, director, producer, author and teacher whose work has garnered three Oscars and three BAFTA Awards. In addition to his groundbreaking work as [...]

  • Instinct

    Locarno Film Review: 'Instinct'

    Now that “Game of Thrones” has finally reached its conclusion, releasing its gifted international ensemble into the casting wilds, will Hollywood remember just what it has in Carice van Houten? It’s not that the statuesque Dutch thesp hasn’t been consistently employed since her startling 2006 breakout in Paul Verhoeven’s “Black Book,” or even that she’s [...]

More From Our Brands

Access exclusive content