In what has to be rather big blow to Netflix Starz has ceased contract negotiations with Netflix. This means that once the contract expires in February 2012 there will be no more Starz movies streaming on Netflix. Although this is certainly not a death toll for Netflix it is not good at all. Starz has rights to both Disney and Sony content which makes their contribution somewhat large to the Netflix catalog.

As you can imagine the issue is the amount of money that is changing hands over the deal. Although the exact amount is not known to anyone other than Starz and Netflix there are some estimates that put the amount at around $300 Million to renew for the next four years.  This is an amount that Netflix just cannot afford to pay.
As we mentioned above this does not mean the death of Netflix, it only means that they will have to come to some sort of compromise. As both Netflix and Starz need each other we are sure this will happen but the exact details of this (or any) compromise is guess work. We would suspect a reduced number in return for more restrictive content rules. This would be similar to when Starz pull their Sony content because Netflix had reached the total number of views for those titles.

The Netflix of next year might not be the same as what we were seeing even last month. If the content dries up they will not be able to justify the price increases and they will lose customers. Conversely if they pay the higher amount to keep the content and raise their prices more they will lose customers that do not want to pay that high of a price for a streaming service. To put it bluntly Netflix is between a rock and a hard place…

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