Entertainment Industry

Category: Starz

Starz planning new digital strategy as Netflix deal ends

AlbrechtBoss
This post has been corrected. See note below.

With 21.5 million Netflix streaming subscribers set to lose access to Starz's movies and television shows in February, the premium cable channel is planning a big digital push of its own in 2012.

Starz President Chris Albrecht said at an investor presentation in New York on Thursday that his network would launch an HBO Go-like application to allow subscribers to watch its content on a variety of digital devices.

In September, Starz decided not to renew its agreement with Netflix.

Netflix offered Starz, which has about 19 million TV subscribers, more than $300 million per year to renew the digital distribution agreement, according to people familiar with the matter who were not authorized to discuss it publicly. However, Starz wouldn't extend the contract unless it was placed on a premium tier that cost customers additional money, a provision Netflix rejected.

Albrecht called the decision to cut ties with Netflix "a big boy choice" that will benefit his company in the long term. "We would have eroded...our core business," Albrecht said at the investor conference for his channel's parent company, Liberty Media. "Within two to three years the Netflix deal would have been a drag on Starz's earnings."

Several TV providers including Comcast and Dish Network already allow subscribers to watch Starz content, which includes movies from Sony Pictures and Walt Disney Studios along with original programs such as "Spartacus" and "Boss," on their websites.

But Albrecht said Starz is building its own digital application that subscribers can watch on numerous devices that probably will include smartphones and tablets.

In addition, Albrecht said Starz is having discussions for other distribution deals with several of Netflix's smaller competitors in subscription online video, which include Amazon.com and Blockbuster.

[Corrected at 4:15 p.m. Saturday: A previous version of this post said President Chris Albrecht was considering making Starz available to high-speed Internet customers who don't subscribe to other cable channels. In fact, Albrecht was discussing a scenario in which people might pay for numerous channels, including Starz, over the Internet instead of through traditional cable television, a spokeswoman said Friday. In addition, the post said Liberty Media would fold Starz's stock into its own. Liberty Starz and Liberty Capital are being combined into a single company with a new stock.]

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-- Ben Fritz

Photo: Chris Albrecht at the premiere of "Boss" in Los Angeles. Credit: Matt Sayles / Associated Press

Dish Network wants subscribers to swap free Starz for Cinemax

It looks like Dish Network is trying to make peace with pay cable channel Starz at the expense of Cinemax.

Earlier this year, Starz sued Dish after the satellite broadcaster started offering the channel free for one year to subscribers as part of a promotion. Now, Dish is pushing its 14 million subscribers to trade in their last three months of free Starz for free Cinemax.

The move by the satellite broadcaster comes one month after Starz said it would no longer make its content, including original shows and theatrical movies from Disney and Sony, available to Netflix. Distributors such as Dish are wary of Netflix and see it as a direct competitor. The decision to give Starz away for a year was seen by many industry observers as retribution for Starz's then cozy relationship with Netflix.

Whether the Starz for Cinemax offer will score Dish brownie points with Starz remains to be seen. A Dish spokesman said the legal battle between the two is ongoing.

There may not be many takers for Dish's offer. Cinemax does not have near the amount of original programming as Starz and the theatrical movies it carries have already run on sister service HBO.

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-- Joe Flint

 

 

 

 

Netflix stock drops 9% on news that Starz deal will end

Netflix stock dropped nearly 9% on Friday as investors sold shares after news that the online video company would lose content from its most prominent supplier of new movies, Starz Entertainment.

The breakdown in talks between the two companies announced Thursday means that films from Walt Disney Studios and Sony Pictures controlled by premium cable channel Starz will not be available when the two companies' agreement expires at the end of February.

Many on Wall Street apparently concluded that the loss of premium content from the studios behind popular hits such as "Tangled" and "The Karate Kid" will be a blow to Netflix's previously surging subscriber numbers.

However, analysts were mixed on what the news means for Netflix. Ingrid Chung of Goldman Sachs pointed out that the company's subscriber growth wasn't affected by the recent loss of Sony content due to a provision in its deal with Starz. "Netflix now has six months to find content to fill the potential void and we view the lowered valuation as very compelling," she wrote.

Anthony DiClemente of Barclays Capital said, "We believe Netflix has a clear indication for what content is worth and the fact that it is willing to let Starz expire suggests to us the company is staying disciplined."

But others thought the Starz news would spell trouble for Netflix. Michael Pachter of Wedbush Morgan Securities predicted that Netflix would return to the negotiating table. If the two sides cannot reach an agreement, "We think that Netflix runs the risk of seeing its subscriber growth sharply reduced, if not stalled completely," Pachter said.

Barton Crockett of Lazard Capital Markets said, "Disney and Sony movies are a cut above the standard Netflix streaming.... Netflix appears to be moving toward lesser known, older content while raising prices... [which] risks dampening domestic subscriber growth."

The bears won Friday as Netflix stock closed down $20.16, or 8.6%, at $213.11.

Shares in Starz parent Liberty Media Corp., meanwhile, were off only $1.15, or 1.7%, at $66.18.

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Netflix to lose Starz, its most valuable source of new movies

Netflix
Premium cable network Starz Entertainment will end its deal to provide movies to Netflix, a surprise decision that will deprive the popular online video service of its most valuable source of recently released movies.

Analysts had said that if Starz were to renew its agreement, which expires in February 2012, it could have been worth as much as $300 million to John Malone's Liberty Media-owned network.

However, executives at Starz apparently concluded that they would lose even more money by giving consumers a reason to subscribe to Netflix instead of the cable channel.

"This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content," Starz said in a statement Thursday. "With our current studio rights and growing original programming presence, the network is in an excellent position to evaluate new opportunities and expand its overall business."

Starz, which controls pay-cable rights to movies from Walt Disney Studios and Sony Pictures, signed its current agreement with Netflix in 2008. At that time, online video was watched by only a small number of tech-savvy young people and the estimated $30 million per year the cable network received was seen as new revenue that would have little impact on its traditional television business.

But Netflix now has 25 million subscribers, the majority of whom watch video online through a variety of devices, including Internet-connected TVs, tablets and smartphones. By providing recently released hit movies from Disney and Sony such as "Alice in Wonderland" and "The Karate Kid," Starz has helped to fuel that growth.

The only other recently released movies Netflix gets for its streaming service come from Paramount Pictures, Lionsgate and Metro-Goldwyn-Mayer via cable channel Epix. HBO, which has offerings from 20th Century Fox, Universal Pictures and Warner Bros., has refused to partner with Netflix.

Starz typically costs about $15 a month for cable and satellite television subscribers, while Netflix streaming costs only $8 a month and doesn't require a pay television subscription.

The move comes two months after Sony movies disappeared from Netflix due to a provision in its deal with Starz. However, people close to the matter had said at the time that they expected Sony movies to return to Netflix soon. With Starz choosing not to renew with Netflix, that will now be a moot point.

The Starz development came on the same day that Netflix implemented a previously announced, controversial price increase that eliminates hybrid plans and charges a minimum of $8 a month to receive DVDs through the mail and $8 a month for online video.

The latter service is likely to become less valuable in the eyes of consumers with the disappearance of Starz's movies and original TV series such as "Camelot."

Starz earlier this year implemented a 90-day delay from the premiere of original series episodes until they became available on Netflix, the first sign that it was reconsidering the value of the partnership.

Netflix stock plunged 8% in after-hours trading Thursday on the news, while Liberty Media stock was flat.

[Updated at 4:57 p.m.: Netflix spokesman Steve Swasey provided the following statement in response to the news:

Starz has been a great content partner since 2008 and we are thankful for their support.

While we regret their decision to let our agreement lapse next February, we are grateful for the early notice of their decision, which will give us time to license other content before Starz expires.

While Starz was a huge part of viewing on Netflix several years ago because it was some of the only mainstream content Netflix offered, over the years Netflix has spent more and more licensing great TV shows from all four broadcast networks and many cable networks, and we have licensed 1st run movies from Relativity, MGM, Paramount, Lionsgate and others. Because we’ve licensed so much other great content,  Starz content is now down to about 8% of domestic Netflix subscribers’ viewing.   As we add even more content in Q4, we expect Starz content to naturally drift down to 5-6% of domestic viewing in Q1. We are confident we can take the money we had earmarked for Starz renewal next year, and spend it with other content providers to maintain or even improve the Netflix experience.

We have tremendous respect for the Starz creative team, and we look forward to someday licensing some of their original or licensed content.]

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Photo: Netflix CEO Reed Hastings at the launch of the company's Canadian service last September. Credit: Mike Cassese / Reuters.

Netflix users see Starz over disappearance of Sony movies

SocialNetwork
As editor of a blog that recommends what to watch on Netflix, Taylor Nikolai is used to seeing movies come and go from the online streaming service. But even he was surprised last Friday when more than 250 films from Sony Pictures were suddenly no longer available.

“It’s the first time I can remember a huge bulk of movies disappearing without advance warning,” the Minnesota resident said.

Customers upset that their Netflix Instant queue unexpectedly lost some of its highest-profile titles, like “The Social Network,” “Salt” and “Grown Ups,” might be frustrated with Netflix and Sony. In reality, the catalyst is a pay cable network whose fate is tied to Netflix: Starz.

As part of its agreements to carry films from Sony and Walt Disney Studios on television, Starz, which is owned by Liberty Media Corp., also acquired the online rights to their movies. In 2008, Starz struck a four-year deal to distribute that content to Netflix that analysts estimate is worth $20 million to $30 million annually. According to IHS Screen Digest, the arrangement covers more than 1,000 movies a year.

The disappearance of Sony’s movies resulted from a clause in the Starz agreement. According to people familiar with the matter who spoke on condition of anonymity because contract terms are confidential, it includes an undisclosed cap, which has recently been exceeded, on the number of people who can watch Sony movies online.

To return Sony’s movies to Netflix, Starz needs to renegotiate the terms with the studio and is likely to seek higher payments from Netflix.

Starz saw the original Netflix deal as an easy way to spread its brand online and generate extra money. But Netflix has exploded in popularity over the last three years. It now has more than 23.6 million subscribers, many of whom watch movies online or on Internet-connected televisions. As a result Netflix has become a competitor to cable channels, putting Starz in the difficult position of charting its future while doing business with its fastest-growing rival.

“At the time the Netflix deal seemed like a good proposition to make money in a medium that wasn’t being used,” Janney Capital Markets analyst Tony Wible said. Starz now is “cannibalizing its own revenue … and potentially trading a dollar for a nickel.”

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Sony movies are pulled from Netflix

Sony movies are pulled from Netflix

Netflix subscribers who are looking forward to watching "The Social Network" are out of luck.

The movie about the legal battle surrounding the origins of Facebook is a Sony Pictures film and was due to debut on Netflix this month. Because of a contractual issue, it and all other movies from the studio are no longer being made available for streaming on Netflix.

Netflix gets the rights to stream Sony movies not from the studio but from Starz, the pay television channel that is owned by Liberty Media. As part of its deal to carry Sony's products on its network, Starz also has streaming rights and signed a distribution contract for those rights with Netflix.

However, the contract Starz has with Sony has a subscriber cap with regard to Netflix. The home entertainment company now has more than 23.5 million subscribers, which exceeds the cap. Starz pulled the movies from Netflix so it wasn't in jeopardy of violating its deal with Sony.

In a statement, Starz said "all parties are working diligently to resolve the issue and return the films to Netflix members."

Netflix did not comment but posted a message on its website saying the movies were pulled because of a "a temporary contract issue between Sony and Starz."

-- Joe Flint

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For the record: This post was clarified to make clear that Sony movies are not available on Netflix's streaming service. DVDs of Sony movies on Netflix are available and not part of this issue.

Photo: Andrew Garfield, left, and Jesse Eisenberg in "The Social Network." Credit: Merrick Morton / Columbia Pictures

Judge denies Disney's request for injunction in fight against Dish Network

TOYSTORY3

Fear not, Dish subscribers, you'll still get to watch "Toy Story 3" for free this weekend.

A federal judge denied Walt Disney Co.'s request for an injunction to stop satellite broadcaster Dish Network from offering its more than 14 million subscribers the pay TV channel Starz for free. Typically, Starz costs Dish subscribers about $13 per month, according to the distributor's website. Customers that were already paying for Starz  received other channels for free.

Dish started giving away Liberty Media's Starz earlier this year. The company said it was doing so as part of its 30th anniversary celebration. Starz was none too happy about this, nor was Disney, which sells its movies to Starz.

Last month, both Starz and Disney filed suits against Dish over the giveaway. Starz claimed Dish was violating the terms of its contract, and Disney argued that giving the channel away for free was hurting the value of its movies. Disney had asked for an injunction requesting Dish to stop giving the channel away while their suits play out in court.

In its suit filed in a Colorado District Court, Starz said its deal with Dish "does not permit Dish to simply give away its channels and content to its entire subscriber base." Starz said Dish was giving away the channel to placate customers who might be upset with other rate increases the satellite broadcaster has imposed. No trial date has been set with the Starz suit.

Disney filed its suit in U.S. District Court in New York City and charged that not only is the value of its movies being damaged, but that Dish's actions are hurting the studio's relationships with other networks and outlets that buy its content. Trial could start as early as December.

Dish, which declined to comment on the judge's dismissal of the Disney injunction request, has said previously that it "pays hundreds of millions of dollars for the right to distribute STARZ content to our customers, which includes the rights to a number of Disney movies, and our current distribution of Disney content on STARZ is permitted under our contract with STARZ."

Some industry observers say Netflix is at the root of the feud between Starz and Dish. Starz offers its content, including Disney movies, to Netflix, which Dish sees as a competitor, and that is what led to the giveaway, these people said.

-- Joe Flint

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Photo: Toy Story 3. Credit: Disney/Pixar.

Disney and Starz sue Dish Network over Starz giveaway

So much for free TV.

Liberty Media's Starz Entertainment and Walt Disney Co. have filed suits against Dish Network over the satellite broadcaster's decision to provide its subscribers a year of the Starz pay TV channel for free.

Dish started giving Starz to its 14.1 million subscribers for a year in February. The company promoted the offer as part of a 30th-anniversary celebration for the satellite broadcaster. Though pay-TV distributors such as Dish often give away premium channels for a weekend as part of a promotional package, a yearlong giveaway is somewhat unprecedented. Starz usually costs Dish subscribers about $13 a month, according to the company's website.

In its suit filed in a Colorado District Court, Starz said its deal with Dish "does not permit Dish to simply give away its channels and content to its enterer subscriber base." Starz accused Dish of giving away the channel to placate customers who might be upset with other rate increases the satellite broadcaster has imposed.

"It is obvious that Dish decided to give away Starz's content and channels in order to preempt and ameliorate complaints about its subscriber-wide increases in rates," the Starz suit said.

The decision to offer Starz for free seems to contradict remarks Dish Chief Executive Charlie Ergen made earlier this year. In February, Ergen told Wall Street analysts that the company doesn't "do a lot with promotional programming on premiums," because he doesn't "like to give away my core business."

However, in this case, the relationship between Starz and movie-rental service Netflix appears to be causing the bad blood with Dish, people familiar with situation said. Starz offers its content, including Disney movies, to Netflix, which Dish sees as a competitor and that is what led to the giveaway, these people said.

As one of the biggest suppliers of content to Starz, Disney said Dish's decision to give Starz away is hurting the value of its movies. Furthermore, Dish's actions are hurting Disney's relationship with other networks and outlets that buy its movies, the company said in its suit, which was filed in U.S. District Court in New York City.

In response to the two suits, Dish said it "pays hundreds of millions of dollars for the right to distribute STARZ content to our customers, which includes the rights to a number of Disney movies, and our current distribution of Disney content on STARZ is permitted under our contract with STARZ." The company also suggested that Disney's anger should be directed at Starz not Dish. "Dish Network does not have visibility to the contract between Starz and Disney, but we will vigorously defend our rights against any attempt to drag our customers into the middle of their dispute.” 

-- Joe Flint

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For the record: This post was updated to reflect a new statement from Dish Networks that addressed both the Disney and Starz suits.

 

Starz may be getting ratings boost from Dish giveaway

In February, when Liberty Media's pay TV channel Starz offered its subscribers a preview of its new drama "Camelot," the household rating was 2.9, which translates to 658,000 homes.

In April when "Camelot" premiered its first episode, the rating was a 2.5. Smaller ratings would usually mean fewer households too, but in this case the number of households that watched that first episode was 865,000.

CAMELOT It was a similar story with viewers. The "Camelot" sneak had a 1.3 rating among total viewers, which equals 842,000 people. The official premiere a little over a month later, which was heavily promoted, had a lower rating in viewers, with a 1.2 rating in viewers, but 1.12 million people watching.

A contributing factor to the numbers growth may be a free giveaway of Starz from satellite broadcaster Dish Network to the bulk of its customers. Many of Dish's 14.1 million subscribers got a letter from Dish recently saying it was giving Starz away for a year. The larger universe of Starz subscribers means its total numbers could rise even as its ratings stay the same or decline.

Premium channels such as Starz usually are not big supporters of such giveaways, and a yearlong one is highly unusual. Interestingly, in a recent chat with analysts, Dish Network chief Charlie Ergen also didn't sound as though he was a fan of such gimmicks.

"We don't do a lot with promotional programming on premiums," Ergen said in February. "I don't like to give away my core business." 

Perhaps Ergen has a different attitude when it comes to Starz because of its cozy relationship with Netflix, which most distributors see as the enemy. Starz makes much of its content, including the movies it carries from Disney and Sony, available to Netflix at the same time it plays on the channel.

During the February analyst call, Ergen seemed to be calling Starz out on its ties to Netflix.

"So when you give away your basic package programming, that to me is not the most logical thing, but then we're not doing very well in the marketplace vis-à-vis some competitors so maybe I'm stupid," he said.

A Dish spokeswoman declined to comment on the extent of the Dish giveaway.

-- Joe Flint

Photo: Eva Green stars as Morgan in Camelot. Credit: Karina Finegan/Associated Press.

 

Starz to delay new series on Netflix streaming, movies may follow

Starz-netflix-camelot Add Starz to the list of premium cable channels pulling away from Netflix.

Just two days after Showtime said it would soon stop making its original series available to stream from Netflix, Liberty Media's Starz, one of Netflix's longest running and most important partners, is changing its policy as well.

Starting April 1, when its new drama "Camelot" premieres, Starz will no longer put its original series on Netflix the day after they first air on television. Instead, Starz will institute a 90-day delay before Netflix subscribers can watch the shows via the Internet.

The pay channel also said that it eventually will institute a similar delay on movies. Starz currently provides movies from Sony Pictures and Walt Disney Pictures to Netflix at the same time it gains the rights.

Netflix spokesman Steve Swasey, however, said, "Movies are not impacted and contractually cannot be delayed."

While that may be true for the moment, the companies' partnership expires in early 2012. Whether and how it may be renewed has been a looming question for both companies. Starz appears to be laying down a marker that, even if the deal is renewed, it will no longer provide its films as quickly.

Starz's announcement reflects a growing concern among many in Hollywood that Netflix is turning from partner into competitor. With more than 20 million subscribers, many of whom stream its library of movies and programs onto Internet-connected televisions, Netflix has in many ways become a premium channel that exists outside of the normal cable subscription universe.

Showtime and Starz's larger competitor HBO has consistently withheld its movies and television shows from Netflix for just that reason.

The new move to hold back original shows indicates that Starz may be growing concerned that providing content too quickly to Netflix could discourage consumers from subscribing to the cable channel.

Past seasons of Starz original series such as "Spartacus" will continue to be available on Netflix.

Swasey of Netflix called the change regarding television shows "evolutionary" and said it wouldn't significantly affect his company. "We value completeness more than freshness," he said.

Several movie studios last year reached deals that include a 28-day delay before Netflix can send  newly released movies on DVD to subscribers.

-- Joe Flint and Ben Fritz

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Photo: Eva Green as the malevolent Morgan in the Starz miniseries "Camelot." Credit: Michael Muller / Starz

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