Starz decides not to renew Netflix deal; Apple ends TV-show rentals

Entertainment provider Starz has decided not to renew its streaming-video deal with Netflix, meaning that content from the network will no longer be available on Netflix's streaming service once the pact expires in February of 2012.

It would seem that the loss of movies from Starz—which has the pay-cable rights to movies from Disney and Sony Pictures, plus some original series such as "Camelot"— will be a bigger deal for Netflix. Starz was a key source for newly released content, and the loss of this content comes a time when Netflix's business model is shifting significantly from disc rentals to streaming.

Although some analysts have estimated that Starz could earn as much as $300 million a year by renewing the deal, it appears the company believes that protecting its pay-cable TV business—and pursuing other non-exclusive deals with other partners—may of greater value going forward.

Certainly the streaming-video world has changed dramatically since the company struck its initial deal with Netflix back in 2008, when there were relatively few Internet-connected devices other than computers that could access streaming TV shows and movies. Now most of Netflix's subscribers choose to get streaming content rather than DVDs and Blu-ray discs.

As a result, Starz may now view Netflix more as a competitor than a partner, with the potential to siphon off paying subscribers from its more profitable cable operations. That's been the view taken by Time Warner with HBO, which has deals with 20th Century Fox, Universal Pictures, and Warner Bros. The company has steadfastly refused to license content from either HBO or Cinemax to Netflix, and has instead launched its own HBO Go and Max Go streaming services as a free benefit to subscribers to those channels.

The move comes at an inauspicious time for Netflix, which recently separated its disc-rental business from the its streaming operations, forcing those who get both to move off an all-inclusive plan and onto separate streaming and disc subscriptions, at a 60-percent price hike.

Perhaps anticipating an end to its Starz arrangement, Netflix recently inked a deal with Epix that allows it to stream movies from Paramount Pictures, Lionsgate, and MGM. Netflix also has a deal with Relativity Pictures for first-run movies, and its looking to start airing some original series. But it does appear that any new content deals reached by the company will be considerably more expensive than its original $30 million-a-year deal with Starz, as evidenced by the $200 million-per-year price tag for its arrangement with Epix. That—as well as possible competition from new streaming services from companies such as Amazon or Google— could lead to even higher prices in the future for Netflix's streaming service, causing some of its users to consider other sources.

If you've recently decided whether to change or continue your Netflix subscription(s), let us know what you did. Also, we'd like to know if the loss of the Starz content from Netflix's streaming selection will affect your decision going forward.

In other streaming-media news, about a week ago, Apple TV owners looking to rent TV shows from iTunes got a bit of a surprise: Apple quietly removed 99-cent TV rentals from iTunes, forcing would-be watchers to buy them, generally for a dollar or more than the rental. The move applies only to TV shows, so you'll still be able to rent movies.

Apple's move may not be popular with some consumers, but it may also go unnoticed by many users who have found the slim price difference between rentals and purchases make buying the shows the better option. Apple, in fact, justified its decision by saying that customers have shown a preference for purchasing. But another likely reason is that other than ABC and Fox, no other networks signed on for TV rentals via iTunes.

—James K. Willcox