SAN FRANCISCO (AP) ? Netflix’s negotiations to keep a key piece of its Internet video library have collapsed, dealing a major blow to the largest U.S. video subscription service as it raises the prices for most of its 25 million customers. The setback triggered a 9 percent drop in Netflix Inc.’s stock price late Thursday.
Starz Entertainment delivered the bad news in a terse statement announcing that it won’t renew a contract that allows Netflix to show a lineup of recently released movies and TV shows over high-speed Internet connections. The content from Starz’ cable TV channel played an instrumental role in increasing usage of Netflix’s streaming service and contributed to Netflix’s ability to add nearly 17 million subscribers since the deal was signed in October 2008.
That means Starz content will be removed from Netflix’s service starting in March. Starz’ library includes movies from Walt Disney Co.’s assorted studios and, until recently, Sony Corp.
Netflix had been expected to work out a new contract with Starz, although at a much higher price than the estimated $30 million a year that it had been paying under the current contract. Netflix CEO Reed Hastings acknowledged earlier this year that he wouldn’t be surprised if the company paid as much as $250 million a year to retain the Starz rights when the current contract expires in February.
But those hopes were dashed, if not blown up completely, with the Thursday bombshell dropped by Starz CEO Chris Albrecht. He said Starz had decided to pull out of Netflix deal at the end of February “to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content.” He also indicated that Starz, part of Liberty Media Corp., believes it could get more money for its content through other outlets.