Despite the growing popularity of streaming movies, Starz has decided to remove its video content from the Netflix streaming service.
"Starz Entertainment has ended contract renewal negotiations with Netflix. When the agreement expires on Feb. 28, 2012, Starz will cease to distribute its content on the Netflix streaming platform," Chris Albrecht, president and CEO of Starz, said in a statement.
But Starz is just a cable channel, right? How much could this affect the streaming library of Netflix?
Pretty heavily, it turns out. Starz happens to own exclusive licensing rights for many movies from Sony and Disney, meaning that when Starz pulls out of Netflix streaming in February, movies such as "Tangled," "Toy Story 3" and "The Expendables" will go with it. Starz also owns the rights to many older cult classics such as "The Toxic Avenger," "Big Trouble in Little China" and "The Karate Kid."
This decision wasn't made lightly. Starz turned down a reported $300 million offer from Netflix, which is ten times larger than their current deal. Starz wasn't able to negotiate the terms they wanted for tiered streaming prices.
"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," Albrecht said.
Netflix refused to adjust its pricing to meet Starz's demands, which could have further alienated customers who are already facing the recent pricing structure changes that Netflix instituted this week. A large portion of Netflix subscribers still use the DVD mailing service, too, which has a much larger library of available movies, including Disney and Sony films.
While Starz's move is a hit to Netflix's streaming catalog, there is still a chance for the movie rental service to come out on top. Netflix has already struck deals with studios such as Paramount, Lionsgate and MGM for movie streaming, so it's possible for the company to make deals with other studios to fill in the gaps. And there's still time for Netflix and Starz to come to a new deal before February.
Even if a deal can't be reached, Netflix CEO Reed Hastings doesn't seem overly concerned about the loss of Starz content.
"Because we’ve licensed so much other great content, Starz content is now down to about 8 percent of domestic Netflix subscribers’ viewing. As we add more content in Q4, we expect Starz content to naturally drift down to 5 to 6 percent 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," Hastings told Business Insider.