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Did Starz Reject $300M Netflix Offer?

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner

Fallout from the bombshell Starz Entertainment LLC lobbed at Netflix Inc. (Nasdaq: NFLX) on Thursday afternoon leads off Friday's extended cable news roundup. (See Netflix, Starz on the Outs .)

  • Netflix offered more than US$300 million to renew its deal with Starz, but the premium programmer balked because it demanded that the video streamer package Starz content with a premium-priced tier, reports The Los Angeles Times. Netflix didn't go for it, but the paper said Starz wanted that condition to protect its relationships (and pricing) with MSOs, telcos and satellite service providers that are fearful that baking Starz into the current Netflix tiers, which start at $8 per month, could leave them vulnerable to more cord-cutting.

  • Netflix hasn't issued a statement about the unraveling with Starz as of this writing, but Netflix CEO Reed Hastings shrugged off the effects in comments given to Business Insider. Hastings said Starz content currently represents 8 percent of domestic Netflix subscriber viewing and expects that to dip to five to six percent in the first quarter of 2012 as it adds a "huge" amount of content before the end of 2011.

  • Jefferies & Company Inc. Managing Director Youssef Squali isn't as confident that Netflix can fill the gap and keep churn in check, pointing out in a note issued this morning that Starz provided Netflix with movies from Sony and Disney representing up to 30 percent of Hollywood studio output. Netflix could try to score Sony and Disney movie deals on its own, but it'll have to settle for later release windows, he wrote.

  • The news on Netflix didn't help out its stock. It was down $19.79 (8.48 percent) to $213.48 each in early trading Friday.

  • A U.S. district judge approved Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s acquisition of NBCUniversal LLC on Thursday with conditions that give the court oversight on the deal for two more years. The court will be keeping a particularly close eye on how the MSO doles out rights for NBCU content to online video distributors. Here's the full order. (See Comcast-NBCU Rules to Frustrate OTT Players.)

  • Mediacom Communications Corp. Chairman Rocco Commisso blasted the Federal Communications Commission (FCC) Chairman Julius Genachowski for not moving quickly enough on its pledge to reform retrans rules. The MSO's in a heated stand-off with LIN Media, with LIN-owned broadcast TV stations still blacked out in several Mediacom markets. (See FCC Reexamines Retrans Rules.)

  • So, maybe Google (Nasdaq: GOOG) does have a strategy for Motorola Mobility LLC 's cable technology assets after all. Company Chairman Eric Schmidt said Moto's product line also formed part of its allure. "We did [the deal] for more than just patents," he said in this Bloomberg report. "The Motorola team has some amazing products." (See Cover Sheet: Google to Acquire Moto Mobility.)

  • Which over-the-top box -- the Apple TV, Roku 2 or Boxee Box -- is the best for the average consumer? According to The Wall Street Journal's Walter Mossberg, his vote went to Apple Inc. (Nasdaq: AAPL)'s latest entry, with Roku Inc. a close second. He recommends Apple TV for people who use iTunes a lot, but was particularly keen on the Roku 2's simplicity and video quality. He liked the vast library of the pricier Boxee box, but found it much more complex and therefore better suited to tech geeks.

    — Jeff Baumgartner, Site Editor, Light Reading Cable

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    User Rank: Light Beer
    12/5/2012 | 4:54:51 PM
    re: Did Starz Reject $300M Netflix Offer?

    If Netflix offered $300M per year, that would enable 22M Netflix subs (Netflix estimate of their streaming subs after rate increase) to stream Starz content.  Doing the math, that works out to a little over $1 per sub per month.  Pay TV license fees for Starz are still 3X to 4X what Netflix offered on a per sub basis.  Would be surprised if Netflix does not begin to see more demands on content renewals be based on per sub fees, vs. flat rate.

    User Rank: Light Beer
    12/5/2012 | 4:54:47 PM
    re: Did Starz Reject $300M Netflix Offer?

    why Netflix want to stick a flat price and rejected a  premium price tier?  as long as the price is better than cable and other tradtional channels, it's also increase NetFlix's revenue and profit.



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