New York – Users of Netflix (NASD:NFLX) may have noticed that Sony movies such as “The Social Network,” “Salt” and “Easy A” have been removed from the company’s streaming video service.
Addressing the issue in a blog post on Friday, Netflix VP of Content Acquisition Pauline Fischer wrote: “You may have noticed that Sony movies through StarzPlay are not currently available to watch instantly. This is the result of a temporary contract issue between Sony and Starz…”
According to Reuters, the “contract issue” concerns a dispute between Sony Pictures Entertainment and its distribution partner Starz Entertainment, which is the exclusive distributor of first-run Sony and Disney movies on pay-TV in the United States with rights to distribute programs wholesale on multiple platforms including online streaming. The problem is that Netflix’s streaming service has grown faster than expected in the last 18 months, triggering a deal clause last quarter that allows Sony to ask Starz for improved financial terms. Now Starz and Sony have to agree to new terms before the studio’s movies will be returned to Netflix.
In a statement on Monday, a Starz spokesman responded by saying that: “All parties are working diligently to resolve the issue and return these films to Netflix members.”
However, there may be bigger problems ahead for Netflix whose deal with Starz is set to expire in the first quarter of 2012, and it is expected that Starz will require a hefty increase to renew.
According to The Street, Chief Executive Reed Hastings said at an All Things D conference earlier this year that “he wouldn’t be shocked to pay as much as $300 million a year to renew a streaming deal with the Liberty Media division”, causing Wedbush analyst Michael Pachter to predict in a note cited by The Street that the increase in content costs will more than offset any savings the company will sees from declining fulfillment, marketing, DVD purchase and postage expenses.
Related Links:
http://tinyurl.com/5tdupbd (Netflix blog)
http://tinyurl.com/3uzz6qs (Reuters)
http://tinyurl.com/3ekm2v5 (The Street)
