Netflix Will Survive Without Starz
If Cablevision (NYS: CVC) was able to survive the contract dispute with Fox last year that left it without Major League Baseball's World Series, Netflix (NAS: NFLX) will do just fine without Pirates of The Caribbean and other movies from the Starz library.
Word that Starz had pulled out of contract renewal talks with Netflix reminded me of that Cablevision spat, and other countless disputes that programmers have had with pay TV distributors. And the lesson that can be gained from those battles is that there is no single content supplier that can determine success or failure for a video programming distributor.
Netflix stock is taking a hit on Wall Street today, and there's no shortage of stories suggesting that it will be difficult for Netflix to keep growing subscribers without the Sony and Disney (NYS: DIS) movies that it has had since 2008 through its contract with Starz. But that's an overreaction -- the Starz content represents just a small fraction of the thousands of TV shows and movies that are available in Netflix's streaming video library.
"Starz content is now down to about 8 percent of domestic Netflix subscribers' viewing," Netflix CEO Reed Hastings told Business Insider. "As we add more content in Q4, we expect Starz content to naturally drift down to 5-6 percent of domestic viewing in Q1."
It's likely that we won't be able to measure the impact that losing the Starz content would have on Netflix subscribers, since it's a good bet the companies will agree to terms for a new contract by the end of February. As Wedbush Securities analyst Michael Pachter noted Thursday, the move from Starz to walk away from contract talks is likely a negotiation tactic.
Starz is controlled by John Malone's Liberty Media (NAS: LCAPA) , which is a public company. Netflix has reportedly offered Starz more than $300 million per year to renew its contract. Malone, who is obligated to perform for Liberty shareholders, isn't going to walk away from hundreds of millions of dollars in revenue for Starz, even if that's something his cable colleagues would like him to do.
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