The LA Times released details of the failed negotiations between Netflix and Starz over streaming rights. According to The Times, Netflix offered Starz $300 million to renew their agreement. However, Starz also wanted Netflix to charge customers an additional fee to stream their content. Netflix said no to tiered streaming plans. Citing sources with inside knowledge of the negotiations, the LA Times reported that Starz wanted to protect cable and satellite partners. Starz fears that their premium content on a low cost subscription service will lead to more cord-cutting.
There is talk of Starz working out a deal with another streaming service like Amazon. Amazon can afford it, but would they accept a deal that requires an additional charge for Starz? Since Amazon’s video service is sort of a hybrid rental and subscription model (Amazon Prime), they have more flexibility to charge extra for premium content. However, Amazon, like Netflix, would most likely want to keep their subscription price as low as possible. Streaming companies realize that customers are flocking to their services for great content at low prices. Mark Mahaney, a Citigroup analyst who tracks Netflix and Amazon, told MarketWatch that it’s unlikely Amazon will strike a deal with Starz.
It would be in the best interest of Netflix and Starz to return to the table. Netflix needs the content, and for Starz, $300 million is a lot of money to walk away from. In a Bloomberg interview, Michael Pachter, an analyst with Wedbush Securities, said “It’s a negotiating ploy (Starz walking out of talks), but an effective one since Netflix simply cannot allow Starz to leave.” “On the other hand, Starz needs to cut this deal.”
