Netflix loses Starz contract, content to be pulled February 28

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In a blow to Netflix's catalog, Starz has announced that its content will be yanked from the streaming platform early next year. In a single-paragraph press release, the Liberty-owned media firm explained that the companies failed to reach contract renewal terms because Netflix wouldn't commit to the "appropriate pricing and packaging" for Starz' videos.

The companies signed a four-year agreement in 2008 that allowed Netflix to host Starz' content, which includes about 1,000 videos from Sony, Walt Disney and other studios. Starz is the exclusive distributor of first-run Sony and Disney movies in the US. Unless talks resume soon, those flicks will disappear from your library on February 28, 2012.

Starz wouldn't elaborate on the negotiations, simply noting that it's in a position to "evaluate new opportunities" and "expand its overall business." Which begs the question: who's willing to pay more than Netflix for Starz' content? We can't think of anyone, which could mean this is a part of Starz' negotiation tactics. If that's the case, the plan has failed.

Netflix stock dropped by about 9% following Starz' announcement but despite the additional pressure, the company released a statement effectively telling the content firm to watch the door on its way out. Netflix said Starz videos account for about 8% of domestic subscribers' viewing and that figure is expected to decline by another percent or two as Netflix adds more material this year. "We are confident we can take the money we had earmarked for Starz renewal next year, and spend it with other content providers to maintain or even improve the Netflix experience," the company said.

Netflix has faced some rough PR this summer and we imagine this will only fan the flames. In June, some 250 Sony movies were pulled from the service because they were viewed too many times. There's reportedly a clause in the Starz agreement which caps the number of IP address that can watch each video. This restriction might be part of the friction that has halted negotiations as Starz would surely demand more cash to raise the limit, but that's just speculation.

In July, users protested Netflix's decision to increase its rates. The company launched new DVD-only plans: $8 a month for one DVD rental at a time or $12 for two. Additionally, it separated its unlimited DVD and unlimited streaming services, which were previously offered together for only $10 a month. Under the new payment system, users must cough up $8 per month for unlimited streaming and another $8 to receive DVDs via mail -- a 60% premium. Those changes affected new users immediately while existing accounts are set to be billed under the new plans starting sometime this month.

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