Starz Ends Relationship With Netflix

Catch it sometime in the next six months!

Not much else to say about this other than the headline; Starz has decided not to renew its streaming partnership with Netflix after their current contract ends in February. That's around 1,000 movies that are going to be knocked off the service; it might be small percentage-wise, but it's a hefty part of their content if you're interested in relatively new releases, to the point where Starz has its own button on the Netflix site's UI. For one thing, that covers a lot of Disney/Pixar and Warner Bros. films that are available on Netflix, as well as stuff like...well, Old Dogs. Here's what Starz is saying:

Starz Entertainment has ended contract renewal negotiations with Netflix. When the agreement expires on February 28, 2012, Starz will cease to distribute its content on the Netflix streaming platform. 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. 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.

Predictably enough, Reed Hastings, Netflix's CEO, is playing a bit of damage control:

While we regret their decision to let our agreement lapse next February, we are grateful for the early notice of their decision, which will give us time to license other content before Starz expires.
While Starz was a huge part of viewing on Netflix several years ago because it was some of the only mainstream content Netflix offered, over the years Netflix has spent more and more licensing great TV shows from all four broadcast networks and many cable networks, and we have licensed 1st run movies from Relativity, MGM, Paramount, Lionsgate and others. Because we’ve licensed so much other great content, Starz content is now down to about 8% of domestic Netflix subscribers’ viewing. As we add even more content in Q4, we expect Starz content to naturally drift down to 5-6% of domestic viewing in Q1. 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.

So that's nice. It's worth noting, though, that Netflix has said that television shows already account for over half its domestic streaming traffic; since the Starz deal largely covers movies, that 8% of total viewing could potentially be twice as large or more if viewed in the context of overall film streaming on the service. That said, the Starz licensing was relatively cheap when the deal was announced back in 2008; now that Netflix has proven that there's a large market for its services, it's likely that Starz wanted a much bigger piece of the action, something akin to Epix' five-year, billion-dollar deal that was reached last year.

Alas, it's not to be. This is a big deal for Netflix, no matter what Hastings says; Disney and Warner Bros. are consistently in the top three studios in terms of grosses each year, so losing those popular films doesn't speak well for the streaming service in an era when they're hiking prices.