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Starz Turned Down $300 Million to Stay on Netflix

Illustration for article titled Starz Turned Down i$300 Million/i to Stay on Netflix

So you know how Starz and Netflix broke up, which, sad! But did you further know that Netflix offered up a whopping $300 million per year to make the third-rate movie channel stay? That's ten times their current deal. Yowza.

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Starz, according to the LA Times, refused to sign off on any deal that didn't involved a tiered pricing plan. That way the movie network could save face with its cable cronies while still making bank on Netflix streaming. Nice try, Starz! But also not a negotiation so much as a round of Hungry Hungry Hippos.

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Netflix, obviously, refused to adjust its pricing, which is in the long-run a hopeful sign for consumers. And that's how we got here: come March, you're going to have to live without streaming second-tier first-run movies Tangled and The Expendables. And Starz is going to have to live without hundreds of millions of dollars. [LA Times]

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DISCUSSION

Starz doesn't own this content. They have output deals with some major studios, as part of the long and windy path of movie industry content licensing, and were sub-licensing the content to Netflix. This way, Netflix wouldn't have to negotiate for new films directly with the studios, who would probably want to do it on a movie-by-movie basis, and charge a far higher amount overall.

Disney put pressure on Starz to turn down the deal, likely threatening to cancel the output deal that gave them access to top-tier content in the first place. Why? Because studios like Disney want Netflix to deal directly with them, so they can wring more money out of the content.

Starz probably made the only choice they could have made here. If they took the $300m, it would only be a one-time payday, as the content providers would cancel their output deals with Starz, shutting down the pipeline that allowed them to sub-license content to Netflix in the first place. By refusing the deal, they keep their content. They just can't sub-license it to digital streaming services anymore. It was a nice racket while it lasted, but it had to end sometime. The studios were only going to stand for it when Netflix wasn't ... well ... Netflix. Now that streaming is huge, they want their piece of the pie, and as the ones who control the content, they've got almost limitless leverage.