HackingNetflix.com’s ongoing poll suggests that Netflix’s price increase, which took effect yesterday, will not yield the apocalyptic exodus that people on social media sites predicted; however, how will news that Starz announced that they are ending negotiations with Netflix over renewing the streaming video deal change Netflix’s future?
On September 1st, Starz President and CEO, Chris Albrecht, announced that the negotiations to renew the content streaming deal have ended and Netflix will cease to distribute Starz’ content on February 28, 2012 as stipulated in the original contract.
Albrecht cites in the press release the desire “to to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content.” He believes Starz is “in an excellent position to evaluate new opportunities and expand its overall business.”
In other words, Albrecht and Starz probably wanted more than the $200 million that Netflix CEO Reed Hastings predicted and now want to test the waters with their content and will look for a more lucrative distribution deal.
The ending of negotiations will result in removal of Disney and other content from Netflix instant streaming in February and the permanent removal of Sony content, which was removed from instant queues last June due to a maximum subscriber clause in the contract between Sony and Starz.
HackingNetflix.com’s poll states that of the +4,500 respondents only 11% will cancel their account and 3.5% will put it on hold. This is a significant contrast to the poll they conducted immediately after Netflix announced the price hike where a third of the ~11,500 respondents declared they would kick Netflix to the curb.
The inability to distribute Starz’ content will definitely hurt Netflix and cause subscribers to look elsewhere for video streaming content; however, the most significant point is not Netflix’s loss, but a competitor’s gain.
The considerable decrease in people stating that they will drop Netflix is probably because there are not many other options, much less better options out there; however, if Starz signs a deal with Amazon or Blockbuster, Netflix will have serious competition for the top of the podium and customers will have other options.
This competition might be great for content producers who are jacking up prices as we speak, but at what cost to the consumer?
Movies and other creative products are not like other goods that your buy at a store. With Epix at Netflix and Starz at another provider, if you want to watch Iron Man 2 and The Social Network, you would need a subscription to two different services. Unlike competition in other industries, these exclusive deals may not drive prices down, but will divide content across a number of providers and in the end might drive the total cost to consumers up.
Update: Netflix reportedly offered Starz a $300 million-plus deal, but Starz wanted tiered pricing, which would have caused Netflix subscribers to pay more for the already $7.99 a month video streaming only plan.