Starz is pulling its content from Netflix in early 2012, and the ripples are being felt throughout the entire video distribution ecosystem. Can Netflix recover? How expensive will content licensing get? What does this mean for over-the-top video as a whole?
With potentially 300 million dollars on the table in a Netflix/Starz renewal deal, it is reasonable to assume that the decision from Starz to pull out of the relationship has to do with more than just direct revenue. I’ve heard from one source that Starz wants to go it alone and follow an HBO Go model. It’s already made its bed with the cable companies, and, like HBO, it sees that it can drive viewership and continuing revenue through that established model. It can’t, however, provide its content through a cheap Netflix subscription to consumers and continue to expect people to see more value in a cable package that costs a lot more. In other words, by licensing content to Netflix, Starz undermines its more lucrative partnership with the cable companies.
So the Netflix/Starz break-up is about more than just money. Or rather, it’s about more than just a one-time licensing deal. It’s about programmers deciding that the OTT free lunch program is over. You know all the concern and hype about cord cutting? I wouldn’t be so worried for the cable companies. The content folks know where their bread is buttered.
If they follow HBO’s model… good luck! I don’t subscribe to Starz now. Starz might make me cancel Netflix, but they certainly won’t get me to start paying individual companies $10 a month to subscribe via satellite so I can watch via iPad.
Is there reason to think this isn’t just posturing? It’s a long time until the contract runs out.
@Scott G.Lewis –
Why would you consider getting rid of Netflix because of the loss of Starz? It only comprises about 8% of Netflix content and their encodes are easily the poorest. I would hazzard a guess that for the vast majority of Netflix users Starz will not be missed. If their content was more compelling and the encodes of a better quality they might be missed; and some consumers might be compelled to pay a premium if Netflix had agree to the tiered pricing. As is, so long Starz.
Mari –
I personally won’t miss Starz for a minute; however, I agree that this latest news probably does not bode well for Netflix and the cable/satellite companies have nothing to worry about for a long time. Until Netflix and the likes develop a consistent, profitable method for bringing content (original programming?) to their platforms, they will remain a niche market and a small player in video distribution.
i love having starz on my netflix and I’m sad i will lose their selection, but i thought i read it wasn’t that big of a loss, because netflix is currently in negotiations to get other contracts? *goes to find article where i read this*
This may punish Netflix but won’t stop people from viewing Starz content even if they are not Starz subscribers.
Once something is broadcast it is always then available online, either through paid distribution like Netflix or Amazon, or for free via Usenet or torrents.
It is in the interest of the content to make the former avenue as easy as possible.
The thing I find amazing is that nowhere in the mainstream press coverage of this kerfuffle have I read anything about the of the execrable StarzPlay PQ.
I mean, I’d think it’d be worth a mention somewhere…
Agreed, Chucky. Unfortunately a significant number of consumers find SD encoded (or sub-SD encodes in the case of Starz) material to be perfectly acceptable…which makes you wonder why they spend the money on a large screen HDTV, spend money on devices/platforms to stream various content and the time to set it all up only to then sit back and watch content that is barely one step removed from VHS, circa 1989.
If your choice is a movie you kinda wanted to see is available for “free” in 480p or $6 via on demand, what do you choose? On the (smaller) bedroom set we’ll catch some SD streaming. Also, I notice Starz sometimes offers kid or family new releases and those audiences may be more tolerant – I’m loaning my in-laws access to my Netflix account because they’re thinking of subscribing (via the Xbox Kinect they just got their kids). They’re not like us, and wouldn’t notice the quality drop or if they did just wouldn’t care. Of course, if Starz were to launch their own thing who says it would be SD only? I guess it depends on what they’ve negotiated and how much they charge (us or the cablecos). But as GigaOm reported, the Netflix Starz deal was never exclusive. Will be interesting to see how this all plays out.
I think Starz will be the centerpiece of the upcoming Bockbuster all-you-can-eat streaming service. If Apple and/or Google makes a move into this space also, you could have 3/4 deep-pocketed companies chasing exclusive content, which will mean content costs go up and everyone loses, because there won’t be a 1-stop destination for the whole enchilada of content.
“If your choice is a movie you kinda wanted to see is available for “free” in 480p or $6 via on demand, what do you choose? On the (smaller) bedroom set we’ll catch some SD streaming. Also, I notice Starz sometimes offers kid or family new releases and those audiences may be more tolerant – I’m loaning my in-laws access to my Netflix account because they’re thinking of subscribing (via the Xbox Kinect they just got their kids). They’re not like us, and wouldn’t notice the quality drop or if they did just wouldn’t care.”
I definitely do understand the market for lean-back SD. I understand the logic the initial deal from both Netflix’ POV and Starz’ POV.
(Personally, when I was plowing through the Netflix library, I completely avoided the StarzPlay material. The stuff in Netflix’ library that I was willing to watch in SD had zero overlap with the StarzPlay library. But I know I’m not the entire market.)
I’m just sayin’ that for a kerfuffle that generated so much media attention, I find it odd that no one even touched on the PQ issue. I mean, the Starz PQ is throttled even below the DVD-quality non-HD material in the rest of Netflix’ library.
And as the ultra-low PQ restriction is likely the core reason why Starz agreed to do the initial deal with Netflix in the first place, one would think the issue would crop up in reporting on the problems in renegotiating the deal.
I think it goes to show most either don’t notice, don’t care… or don’t actually subscribe to the service. I subscribe and I often care, but Mari beat me to the post as I’m chillaxin’. :) Although now that we’ve finished Mad Men and the Roku 2 review is in the can, I may unsubscribe again. Wish there was some sort of curated list of Instant titles worth catching.
“I think it goes to show most either don’t notice, don’t care”
Sure. But the negotiations between the content companies and the OTT distributors all revolve around PQ.
And since most of the Starz/Netflix kerfuffle revolved about ‘teh biz’ aspect of it all, I’d think a reporter looking for an fresh angle would touch on the topic.
“Wish there was some sort of curated list of Instant titles worth catching.”
No doubt.
My strategy was to simply comb the list for HD, since only indies and foreigns were pretty much the only ones giving up HD rights. (I was also willing to watch some of the obscure art house docs in SD, although some of the docs are also in HD.)
If you like movies that don’t play in the suburbs, Watch Instantly is worth devouring from time to time. (Catch We Live in Public if its still on Netflix Streaming. Sad, and not a great date movie, but if you’re a video hobbyist and/or social media tourist, and/or a conceptual art fan, it’s pretty a fascinating watch.)
Oh, I absolutely agree pq is/was a factor. It was no accident Netflix landed SD quality (despite what seemed like an exorbitant licensing fee at the time). But it brings up another issue Starz may run into as they renegotiate their own deals – studios may limit/prohibit what they resell. Another reason to go it alone?
They better get their damn HBO Go equivalent functionality on right quick then, cuz all those people who are willing to pay for their stupid channel expect access everywhere now. I stopped paying for Starz myself over just this issue–that I can’t transfer the shows between Tivos or via TTG, or watch it on my iPad or iPhone or get access to any back catalog at all… Just not worth my money then, sorry. Lots of other shit out there to watch and only a limited amount of time to watch TV.
“Oh, I absolutely agree pq is/was a factor. It was no accident Netflix landed SD quality (despite what seemed like an exorbitant licensing fee at the time)”
Along the same lines, I read this morning that the initial UltraViolet rollout will be for a Blu-Ray disc with the normal Blu-Ray quality movie on it, along with the rights to an UltraViolet SD version of the movie for three years.
I find the studios’ ongoing effort to most discover the most effective way to price and monetize the PQ issue endlessly fascinating. It’s really an area where the correct answers aren’t yet visible.
(And I’m of the suspicion that the reason HBO Go on Lean-Back has been “coming soon” for a looooong time now, but never seems to ever actually arrive, is tied into this issue.)
I understand PQ but when I am looking for something to watch PQ is like 3rd on my weight factor assuming it is acceptable enough; such as SD is to me. Few in my household could tell much difference between SD or HD unles it was a notable example.
You guys have a little groupthink going on here about PQ being that important to consumers at large. Now to archivers who are the main bit-torrent feeders, PQ is important so studios that let their SD out more but gaurd their HD stre following a path to thwart the free stuff some, though we all know it will show up in torrents somehow anyway.
Starz going away from Netflix will be like Hulu to me. When it was there and available in various ways – I used it and had no issue eithr paying the reasonable fee or dealing with Ads etc..
When they start to play games and make me jump through hoops though, then I am not chasing after them and they can subtract me from the eyeball list. This is no different from mp3s, vhs tapes, VOD and so on. The companies that get the delivery model that is easiest for viewers will get the cash and the rest get to go home and sulk.
“You guys have a little groupthink going on here about PQ being that important to consumers at large.”
I think PQ is important to pricing power.
(PQ is highly important to me personally as a consumer, but I’m well aware that I’m not the average consumer.)
What matters here isn’t what the average consumer finds important. What matters here is what the average consumer dollar spent on content finds important.
The open question is how much more pricing power HD has than SD. I think the studios originally thought that they could sell ultra-SD material for a low price and not lose any of their pricing power over HD material. That seems losing some of its value as conventional wisdom among the studios, which is seemingly why the whole Starz/Netflix kerfuffle happened.
Speaking of PQ – we had some friends over yesterday to watch movies on my new 1080P 120Hz tv. They loved the PQ, commenting on it often. They even started questionng if what they have is really an HDTV. But the real problem is that they have mainly SD sources – older dish network and DVD. They do have a BluRay player, but it it connected up using component cables, not HDMI, and the tv is only 720P. So they hadn’t even noticed the SD PQ until they got into a situation where they were exposed to true HD.
I have another friend who connects all his sour es to his HDTV using S-Video cables. I’ve explained the reason for using HDMI, but he refuses to believe it. So his HDTV is just showing SD enlarged.
So, in my experience, a large fraction of the American public are unaware of the dramatic difference in PQ because their home systems are hooked up wrong or can’t support it. What the broadcaster (Starz in the case) sends out works for them. Which is very sad. I already avoid all Starz content on Netflix – so no loss to me.
“So the Netflix/Starz break-up is about more than just money. Or rather, it’s about more than just a one-time licensing deal. It’s about programmers deciding that the OTT free lunch program is over. You know all the concern and hype about cord cutting? I wouldn’t be so worried for the cable companies. The content folks know where their bread is buttered.”
I actually take Starz at their word. They’d like to do a deal with Netflix, just as long as Netflix charges a special Starz “tier”.
In a weird way, this would work for everyone. If you want the Starz ultra-SD content via Netflix, you pony up an extra $1 or $2 a month over the rest of your Netflix subscription. Works for consumers. Starz gets to sell ultra-SD content for dollars while serving as an advertisement for the Starz brand, which would sell its HD content at a much higher price through MSO’s. Works for Starz.
Netflix seems to be resisting since they see their all-you-can-eat model as key to their build-out. But maybe they should reconsider their position here.
(Of course, maybe we shouldn’t take Starz at its word, and this really is about nothing more than a dollars negotiation. But I think it more likely that Starz is actually saying what they want.)
So it’s not just about Starz knowing where its bread is buttered. It’s about Starz wanting to re-sell both low PQ content and high PQ content to consumers who want each.