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Netflix's vanished Sony films are an ominous sign

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8K views 34 replies 15 participants last post by  audacity 
#1 ·
Pachter predicts Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.

Netflix subscribers got a taste of the studios' new hardball approach last month, when hundreds of Sony (SNE) movies -- including high-profile titles like "The Social Network" and "Salt" -- abruptly vanished from Netflix's "watch now" catalog.

In a blog post, Netflix pinned the blame on a "temporary contract issue" between Sony and Starz, a pay cable network that licenses Sony's movie catalog. Back in 2008, Netflix struck a four-year deal with Starz that gave it streaming access to Starz' offerings.
 
#2 ·
Long story short.

Netflix is going to get a lot more expensive or lose a lot of content.

My guess is a combination of both.
 
#3 ·
Netflix has also shown that they are more than happy to coast along with back-catalog content and just pick up the stuff that is less expensive to license. In other words they are saying to the movie studios "hey, we just need movies; we don't need your movies".

I suspect that this will be their going-in position at least. While it is true that Netflix has more competition now as new streaming media companies come online, if the market for licensing streaming content is to get more expensive, there needs to be a company out there that is willing to pay higher rates than Netflix. Who will that company be? If Hulu, Amazon, or Google (or whoever this "I want to be like Netflix" company ends up being) are willing to pay more for their content than Netflix is, they will probably be charging a higher rate for their users, which will make it difficult for them to grab marketshare from Netflix.

Also, note that while there may be examples of Netflix' failure to license (like this one), there have also been very successful in licensing other content from companies like Paramount/MGM/Lionsgate.
 
#4 ·
if the market for licensing streaming content is to get more expensive, there needs to be a company out there that is willing to pay higher rates than Netflix.
With TV Anywhere initiatives, the studios may be content to go through broadcast distributors only. The studios may also decide to do themselves ala Hulu.
 
#8 ·
I can't remember the specific piece right now, but I remember reading an article a few weeks ago which was talking about how Netflix ability to pay more for a TV series than, say, CTV or Global could end up meaning that Netflix could buy exclusive distribution rights for those programs in Canada.

I guess its an open question: at the end of the day can the existing Canadian network afford to be in this world of more expensive content?
 
#5 ·
If it comes down to it, I would rather Netflix stick to the older content at its current cheap price than trying to get newer "high profile" content. I think the service will be much less attractive if they start increasing the monthly cost. We primarily use netflix to catch older tv series and movies we have missed (or loved and want to rewatch) but not as a place to watch first run content. Netflix has made headway in reducing people's reliance on piracy to obtain content, and if their price increases dramatically, the studios may see an increase in the rate of piracy.
 
#6 ·
It's a no-brainer that prices will go up and selection with each broadcaster will become limited as competitors appear. The big studios are in control as they act as a cartel to maximize income and profits. The end result is that content prices progressively increase and consumers must pay more and more. Exclusive contracts guarantee that prices go up as broadcasters bid for rights. Programming costs increase as more broadcasters enter the market and compete for those rights. Consumers must subscribe to more broadcast services in order to access a full catalog.

In Canada, we actually had it pretty good for awhile. A limited number of channels provided a wide range of programming at a relatively small cost. There was more than one premium movie service but they both carried a large catalog. Then the CAT2 channel explosion happened and costs exploded for TV shows and second run TV movies. Then SuperChannel and Netflix came along to fragment the premium TV movie market, increasing consumer costs even more. That's only the start. Internet movie streaming services are set to explode and drive up those costs even further. The demise of DVD rental stores is also playing a part since infrequent movie and TV viewers find fewer outlets for selective PPV rentals. In the end, studios win, consumers lose.
 
#7 ·
ScartBob,

With the current prices on Netflix and its competitors viewing movies has never been cheaper (when you account for inflation). To think of the days when Canadians only had access to a few Canadian broadcast networks as "having it pretty good" is really putting on the rose colored glasses.

I was born in 1977 (34 years old), and growing up my family had cable for as long as I could remember. Now I pay $8/month for Netflix, have a HTPC to record OTA TV and watch free streaming video the rest of the time. I think we've never had it better than it is right now. At least not in my lifetime.
 
#9 ·
To think of the days when Canadians only had access to a few Canadian broadcast networks as "having it pretty good" is really putting on the rose colored glasses.
Netflix is an improvement but I find the Canadian content service's extremely limited. I thought good was when we had fewer content providers with a better variety of higher quality content than we have now. Paying 5 times as much for 5 times the number of stations and then having to pay extra for Netflix but getting less high quality content is not good.

Even today, most of our TV viewing is split between major networks during prime time and DVD rentals. 50 years ago, we didn't have DVD rentals but we did have movie theaters and cable was about 1 to 2 hour's wages per month for the average worker ($2-$3/mo with no extra fees or taxes.) The US stations we received had twice as many new network shows, sports and movies all weekend, all night movies all week and hardly any repeats. All those new channels sounded great at first, indeed the first round of CAT1 channels were, but it's been all downhill since then. Now its extra for premium or specialty channels where a lot of the new shows are now aired, extra for movie channels, extra for sports channels, extra for Netflix and so on. The stations that once aired that content for free now have infomercials all night and syndicated repeats all day. With the exception of HDTV, the ability to record and the addition of internet streaming, I don't think things have improved that much. The amount of available new content has stayed fairly stagnant while delivery has fragmented and costs have soared.

To get back to Sony and Netflix, it is ominous because we may now have to pay more, from another service, to get that content. See the pattern yet?
 
#10 ·
On the US market, Netflix expects to pay more for streaming content, and will be happy to do so at the right price. They had a really good deal with Starz/Disney and this deal will be a lot more expensive when it's renewed. But at renewal the increased number of subscribers will be a lot compared to the initial subscribers they had then. I believe the same holds true here.
 
#15 ·
Netflix loses main source for content

In case you haven't heard but it sounds like content on Netflix USA may start looking more like Canada's. I am not sure how much, if any Netflix Canada content comes from Netflix's now ended contract w/Starz but lets hope it's not much.

http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/09/netflix-to-lose-starz-its-most-valuable-source-of-new-movies.html


It looks like the greed is still alive and well within big studios and now big cable. They definitely are starting to really dislike the idea an $8.00 a month option even for older films no one even buys anymore.

Either way this is not good news for Netflix and especially us subscribers.
 
#16 ·
Why are the studios greedy? Netflix is being greedy because they aren't paying a fair price for the content. Greedy is a silly term. This is a contract negotiation between two big companies who are haggling over the price.
 
#27 ·
Oxford definition of greed: "intense and selfish desire for something, especially wealth, power , or food".

With all due respect, if you believe that silly word has nothing to do with studios and these Netflix contracts (or any big money contract like this) you are out of touch with what has become the driving force of most big business practice. To compare this to me asking for a raise that I am due is a very bad comparison. But hey, it's capitalism at it's finest and yes, companies want to maximize as much profit as possible. However, when those actions are aimed at destroying another company which it looks exactly like some of these studios would love to see happen to Netflix, it can certainly be defined as greed by definition.

Anyhow, in the end it will be the consumer that drive what services survive. I sure hope Netflix does survive and does so without having to be forced to double or even triple the price because the studios aren't making "enough" profit.
 
#17 ·
They're all being greedy. That's what big business is.

And Netflix IS paying a fair price. They're paying the price they negotiated with the Studios. However the Studios now see Netflix as a threat to their business models and want more. They're still stuck in the 90's.

I refuse to pay Rogers 8.99 for a Hi-Def movie, especially since there are NO other options. Blockbuster Canada now has been ordered to shut down their remaining stores.

In the end, it's about squeezing maximum profits out of the customer- by reducing their choices. By streaming directly with the BDU's only, the sky is the limit for price, rather than playing with Netflix for $8 a month.

In the end by limiting customer choice, it's only going to fuel piracy.
 
#18 ·
And when you ask for a raise, are you being greedy?

In the end by limiting customer choice, it's only going to fuel piracy.
So if something is expensive or "more than you want to pay" then you steal it?


Netflix raised prices in the U.S. Is that greedy too?
 
#19 ·
Back on topic

Netflix shares tumble as Starz deal unravels

interesting from article

That growth probably wouldn’t have happened without the boost that the Starz deal gave to Netflix streaming, said Janney Montgomery Scott analyst Tony Wible.

“What created (Netflix’s success in streaming) is frankly, initially getting Starz, getting that content, which got you more subscribers, which allowed you to buy more content,” Wible said. “The virtuous cycle that has made Netflix what it is could work against it. If you lose content, you lose subscribers; ... it could be a downward spiral from here.”

Netflix had been expected to work out a new contract with Starz, although at a much higher price than the estimated $30-million a year that it had been paying under the current agreement. Netflix CEO Reed Hastings acknowledged earlier this year that the company might have to pay as much as $250-million a year to retain the Starz rights when the current contract expires in February.
 
#20 ·
I see the point that you're making Hugh and i see the point that a lot of others are making. Currently $8 a month for a lets call it a premium movie channel is a good deal, when you factor in paying double that for the movie network. You also have to factor in the cost of maintaining an internet service to be able to take advantage of the $8 a month service so lets just break that down and say most ppl that are using Netflix are only using 20% of their internet service potential and then streaming video. The price add's up.

The reason i don't have netfllix is because i sub to the movie networks on cable. I want my HBO content. If i didn't care about the HBO content or wanted to spend time searching the internet for streaming of it or other crap then i'd probably drop the movie networks and go with something like Netflix. But its not worth paying for multiple services to me.

But if you look around it seems like all the studio's have broken off on thier own with announcements of thier own streaming services. Seems to be the flavour of the month. When they finally realize that ppl just arn't going to pay for just Sony movies or just Universal movies they'll migrate back to a service which can give them a steady cash flow.

Sony does have the Crackle app as well on the Ipad/Iphone, which is free but the movie selection on there is pretty limited.
 
#21 ·
As I said two months ago

Long story short.

Netflix is going to get a lot more expensive or lose a lot of content.

My guess is a combination of both.
In hindsight, Starz and Sony made some really dumb deals by selling off the rights to some very valuable assets for a really low price. The result was NetFlix made some awesome profits.

Clearly Sony and Starz aren't going to make the same mistake twice.
 
#22 ·
And when you ask for a raise, are you being greedy?
If you're in a union, yes. Big difference between Joe Schmo and Hollywood Studios.

So if something is expensive or "more than you want to pay" then you steal it?
We're in a different world now, where digital monopolies are becoming the norm. I'm not saying I'm advocating Piracy. I'm saying if a service like Netflix exists to provide low-cost delivery of media legally, this will take the wind out of the sails for a lot of Pirating. Without it, people are forced to pay BDU costs as you can no longer rent movies from brick and mortar stores.

Netflix raised prices in the U.S. Is that greedy too?
They didn't really raise the prices. They separated their very expensive mail-order DVD rental business and their online delivery. In effect, they're slowly moving away from DVD mailing and trying to push people into online delivery.

But if you look around it seems like all the studio's have broken off on thier own with announcements of thier own streaming services. Seems to be the flavour of the month. When they finally realize that ppl just arn't going to pay for just Sony movies or just Universal movies they'll migrate back to a service which can give them a steady cash flow.
Agreed. This is exactly what will happen. Online delivery is here to stay. Rental stores are a thing of the past. Now it's up to who can deliver the MOST content at the best pricing.
 
#23 ·
I think Netflix will stay on top of the curve. They will buy whatever they find is the best value for their customers. They split the services so they could spend more on streaming content, because they knew fully well that Starz's and others would be asking for more. It's actually normal for Studios to ask for more money since Netflix now has more subscribers. But with more subscribers Netflix can also afford to spend more...
 
#24 ·
The Starz content isn't that big of a deal. I think Starz just threw away $250M. It (and DVDs) may have helped Netflix get the subscriber base initially and now that they have it, most will stay. They'll just watch some other movie instead of a Starz movie. It was nice, but there wasn't much on there that would be a deal-breaker IMO.

Netflix has the customer base and the device penetration now and it will be hard for anyone to catch that in the near term.

And subscribers just have to understand that this service is more about "browsing and picking something you've maybe never heard of" rather than "searching for specific titles". While everyone's still in the mode of the later, we're just going to be bombarded with these "content sucks" and "Netflix is going to crash & burn" threads. Almost (80% or more) of the content I've enjoyed on Netflix was stuff I've never hear of. Ditto for the kids - absolutely loving kids series' they'd never seen or heard of before.

And there's plenty of small independents that are thrilled to be able to get some audience on Netflix.

So they should just say adios to Starz and keep their $250M for other opportunities. Starz is the big looser in this situation if you ask me!
 
#28 ·
With all due respect, if you believe that silly word has nothing to do with studios and these Netflix contracts (or any big money contract like this) you are out of touch with what has become the driving force of most big business practice.
With all due respect, you are out of touch on what a contract negotiation is. Every person, union or business, tries to get the best deal for themselves in a contract negotiation.

That's not greed that's self interest. Anyone who doesn't look our for themselves is an idiot.
 
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