Netflix offered $300 million-plus, but Starz wanted higher consumer prices
Starz didn't just want Netflix to pay more money for its content. It wanted Netflix consumers to pay more too.
Netflix offered Starz more than $300 million per year to renew their agreement, but the pay cable channel was insistent on so-called tiered pricing, according to people close to the negotiations but not authorized to speak on the record. Tiered pricing would require Netflix subscribers who want movies and television shows from Starz and other premium providers to pay more than the standard $8 per month.
That demand was apparently a key sticking point in talks that fell apart Thursday, meaning the two companies' deal, which began in 2008, will expire at the end of February.
Starz wanted Netflix to charge a premium price for its content in order to put the popular online video service more in line with cable and satellite providers. Protecting relationships with multiplatform video programming distributors (MVPDs) like DirecTV and Time Warner Cable is critical to Starz. The MVPDs are wary of Netflix because they fear customers will "cut the cord" if enough fresh content is available online at a lower price.
Netflix was apparently unwilling to introduce higher prices for access to certain content on its streaming service. The company's chief content officer Ted Sarandos, who led negotiations, declined to comment beyond an official statement that did not address the issue.
However, the company was willing to pay a very high price for access to the movies from Walt Disney Pictures and Sony Pictures that Starz controls, as well as original series like "Camelot." It offered more than $300 million annually, a person close to the talks said, more than 10 times the rate that it currently pays.
Netflix must determine how to maintain its rip-roaring subscriber growth despite the impending loss of popular first-run movies like "Tangled" and "The Karate Kid." Starz, meanwhile, must find a way to make up for the $300 million-plus that it gave up -- with its traditional television business or a deal with another digital subscription video provider such as Amazon.com.
-- Ben Fritz, Joe Flint and Dawn C. Chmielewski
Photo: Movies and television shows available to stream on Netflix's website. Credit: Netflix