Sony Movies Pulled From Netflix

[Woochifer]

Another example of just how fragile Netflix's market position can be. Technically, Netflix licenses movies produced by Sony Pictures from Liberty Media/Starz, because Starz's deal with Sony includes the streaming rights.

This has become an issue because Starz's content deal with Sony only covers a specified number of subscribers. With Netflix's growth, Starz now exceeds this subscriber cap, so they have pulled the plug on Sony Pictures' movies.

http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/06/sony-movies-pulled-from-netflix-.html


Netflix gets the rights to Sony movies not from the studio but from Starz, the pay television channel that is owned by Liberty Media. As part of its deal to carry Sony's products on its network, Starz also has streaming rights and signed a distribution contract for those rights with Netflix.

However, the contract Starz has with Sony has a subscriber cap with regard to Netflix. The home entertainment company now has more than 23.5 million subscribers, which exceeds the cap. Starz pulled the movies from Netflix so it wasn't in jeopardy of violating its deal with Sony.

Everybody involved anticipates that this is a temporary stoppage that will be resolved shortly, but it illustrates that anyone subscribing to Netflix cannot count on particular movies or TV series to always be available. Thousands of titles under the control of a particular studio can be pulled off of Netflix's streaming service in an instant, as just happened with the Sony Pictures content.

As Netflix's subscriber counts have risen, their content costs have increased even faster, as the more recent content deals now have Netflix paying upwards of 10X more than what they paid less than two years ago.

What happens if the content costs continue to escalate exponentially? Will consumers stay with Netflix if the $8/month rate goes up, or if large swaths of movies get pulled?

And with Amazon pushing their own streaming service, what if they decide to negotiate exclusive rights to a major studios' movies? That would potentially leave these streaming services in a similar situation that you have right now with HBO, Showtime, and Starz each carving out exclusive access to specific studios' releases.

No one channel has rights to all movies from all studios, or even most. That's the challenge that awaits Netflix, as new streaming competition from Amazon (and potentially from Google and Microsoft) could look to exclusivity as a quick way of locking up market share while damaging Netflix's product in the process.

Even if Netflix continues to pull big numbers, consumers might face an increasingly balkanized market. This scenario would force them to choose between subscribing to one service, knowing that large libraries of content might be unavailable, or subscribing to all of them and negating some of the cost savings from "cord cutting."

Things are going to get very interesting as Netflix's dirt cheap content deals (negotiating when their subscriber counts were much lower) continue to get renewed at much higher rates.

[Smokey]

Netflix gets the rights to Sony movies not from the studio but from Starz, the pay television channel that is owned by Liberty Media. As part of its deal to carry Sony's products on its network, Starz also has streaming rights and signed a distribution contract for those rights with Netflix.

However, the contract Starz has with Sony has a subscriber cap with regard to Netflix. The home entertainment company now has more than 23.5 million subscribers, which exceeds the cap. Starz pulled the movies from Netflix so it wasn't in jeopardy of violating its deal with Sony.

What the hell kind of deal is this. You will get slapped if your company grow!!

I smell a price increase :yesnod:

[Woochifer]

What the hell kind of deal is this. You will get slapped if your company grow!!

I smell a price increase :yesnod:

That's exactly why the subscriber cap is in place, so that when the subscriber count exceeds a certain amount, the payout gets renegotiated. These new content deals are why Netflix's expenses are rising way faster than their subscriber revenue.

Netflix was able to ramp up their streaming service for $8/month because their previous content deals were negotiated when Netflix's subscriber counts were low. The new deals have been renegotiated at a much higher rate, so Netflix has to either live with a lower margin, take steps to ensure that their subscriber growth remains high, or raise their fees.

And all signs are pointing to the latter. In addition to the higher content costs, they're also trying to shorten the release window so that movies can get posted for online streaming sooner. That costs money.

And they are now starting to produce their own original programming. This also costs money.

This rights issue with Sony's movies is just a preview of things to come. Just look at the increasing frequency of carriage fee disputes between broadcasters and service providers. Streaming services are not immune to this, no matter how much enamored verbiage the tech press writes.

[pixelthis]

You sure do have a problem with NETFLIX, which doesnt bother them
at all as they steam right along.
None of the "doomsday" scenarios you posit are going to happen
for one reason...money. And there's plenty to go around.
NETFLIX charges eight dollars a month, and you act like if they
increase this paltry amount they will lose customers, implode,
curl up and die.
Not really. THE EIGHT BUCKS is to increase market share, they
were going to have to increase it sooner or later, and everybody in the universe except you seems to know this.
CABLE and SAT charges five to six bucks for a single
new movie, people pay 12 bucks a month for sat radio, the
amount NETFLIX charges is minisclue by some camparisons.
THE video stores are dead DVD has become a cheap commodity, BLU has a way to go to establish itself, cable
charges an arm and a leg, sat isnt much cheaper, Uverse is
just getting started.
AND everything you buy these days except toasters have
NETFLIX APPS.
This company is well marketed, which is sometimes more important than being well run, you can survive being run badly for awhile, nothing will save you from bad marketing.
NETFLIX practically overnight has become the Coke of video
delivery. AND LIKE THE RICH lady who said that she could get away with one murder, NETFLIX can get away with a lot...for now.:1:

[Feanor]

Clarify this for us, Wooch: does Liberty Media/Starz by Sony on a per viewing basis or a flat rate basis? I don't get what the Sony-imposed limitation is all about if it's on a per viewing basis.

It's strange economics if media licensers demand more per viewing if number of viewings goes up. In the rest of the commercial world you get volume discounts.

[Woochifer]

You sure do have a problem with NETFLIX, which doesnt bother them
at all as they steam right along.
None of the "doomsday" scenarios you posit are going to happen
for one reason...money. And there's plenty to go around.

As usual, you're not looking at what's actually happening in the market and connecting them to how other markets have actually played out.

Consider that Amazon, Google, and Microsoft are all ramping up their own video content streaming services (and Apple has yet to announce their video streaming plans for iCloud). Amazon in particular is making a very aggressive play for market share. The only thing they're lacking is content, and that's where their much larger revenues and cash reserves come into play.

Yeah, money talks. Money also buys exclusivity and market share. Amazon can simultaneously boost their own market share, and knock Netflix down by negotiating exclusive access. Carving out exclusive access to Disney and Sony Pictures movies is exactly how Starz was able to ramp up their service and compete with entrenched players like HBO and Showtime.


NETFLIX charges eight dollars a month, and you act like if they
increase this paltry amount they will lose customers, implode,
curl up and die.
Not really. THE EIGHT BUCKS is to increase market share, they
were going to have to increase it sooner or later, and everybody in the universe except you seems to know this.

Try reading the comments from Netflix subscribers sometime. Anytime this kind of speculation arises, all hell breaks loose. They don't "know this." They actually expect this dirt low pricing to continue indefinitely. I'm simply laying out the reality that Netflix's costs are spiraling out way faster than their subscriber growth.


CABLE and SAT charges five to six bucks for a single
new movie,

Because those are new or recent releases, which people are willing to pay more for. If you actually subscribe to Netflix (like I do), or bother to check up on what Netflix offers, you'd know that Netflix does not carry new releases.


THE video stores are dead DVD has become a cheap commodity, BLU has a way to go to establish itself,

And what does any of this have to do with Netflix's escalating content costs?


cable
charges an arm and a leg, sat isnt much cheaper, Uverse is
just getting started.

And cable, satellite, and UVerse all offer up programming options that aren't available on Netflix. If you watch sports, are you going to cancel cable and rely just on Netflix and OTA broadcasts?

Right now, Netflix offers up older movies and TV shows on demand for $8/month. Well worth that price, and a great alternative to the video store or kiosk on nights I'm not looking for new releases. But, no way would it replace what I watch on satellite.


AND everything you buy these days except toasters have
NETFLIX APPS.

And more and more products now also come with Amazon Cinema, Vudu, Google TV, and any number of other competing services. Competition and escalating costs are Netflix's issues.


This company is well marketed, which is sometimes more important than being well run, you can survive being run badly for awhile, nothing will save you from bad marketing.
NETFLIX practically overnight has become the Coke of video
delivery. AND LIKE THE RICH lady who said that she could get away with one murder, NETFLIX can get away with a lot...for now.:1:

Marketing is also a huge cost, and in Netflix's case, an escalating one. Once any subscription service reaches a certain point, then the customer acquisition costs go way up, because all of the low hanging fruit has already been picked.

When you look at the competition that Netflix has gnawing at its heels, they all have much healthier cash positions and far larger revenue. They also have other platforms that they can leverage to ramp up their video streaming services. Compared to Amazon, Google, or Microsoft, Netflix is the baglady.

[Woochifer]

Clarify this for us, Wooch: does Liberty Media/Starz by Sony on a per viewing basis or a flat rate basis? I don't get what the Sony-imposed limitation is all about if it's on a per viewing basis.

It's strange economics if media licensers demand more per viewing if number of viewings goes up. In the rest of the commercial world you get volume discounts.

These content deals that the studios negotiate with the premium movie channels are done as a blanket coverage arrangement at a flat rate. This saves the studios and broadcasters from having to negotiate separate deals for every individual movie. The broadcaster pays a flat rate for the rights, and gets access to the studios' movies after it has passed through the theatrical, home video, and PPV release windows.

You have to remember that all of the content deals that Netflix negotiated when their streaming service was just starting up assumed a low number of viewers. Now that Netflix has exceeded 20 million subscribers, the content providers want more. And the new content deals coming up for renewal have resulted in much higher payouts.

In the case of Sony, I would guess that this this subscriber cap is a technicality where the flat rate gets renegotiated if Starz's subscriber growth exceeds a certain amount. Starz currently has about 19 million subscribers, so that subscriber cap in the Sony contract obviously had Starz's subscriber count in mind.

But, to me it illustrates just how easy it is for thousands of titles to become instantly unavailable on Netflix or any other streaming service. Premium movie channels like HBO, Showtime, and Starz decided a long time ago that they would not carry all movies from all studios.

Each of those channels have exclusivity deals with specific studios, where the recent releases go exclusively to one channel. That's where I potentially see the streaming market headed, with different services carving out their own turf with different studios.

Original programming is how HBO, Showtime, and Starz have insulated themselves, and that's where Netflix is already headed as well. With all six major studios asking for exorbitant fee increases, Netflix very well might get to a point where they're no longer willing to pay those fees to every studio anymore (and that decision might be out of their hands anyway, if someone like Amazon for example is willing to pay more for exclusivity). Original programming allows them to retain (and attract) their subscriber base, and those rights cannot be taken away because they own the programming.

[pixelthis]

As usual, you're not looking at what's actually happening in the market and connecting them to how other markets have actually played out.

Consider that Amazon, Google, and Microsoft are all ramping up their own video content streaming services (and Apple has yet to announce their video streaming plans for iCloud). Amazon in particular is making a very aggressive play for market share. The only thing they're lacking is content, and that's where their much larger revenues and cash reserves come into play.

Yeah, money talks. Money also buys exclusivity and market share. Amazon can simultaneously boost their own market share, and knock Netflix down by negotiating exclusive access. Carving out exclusive access to Disney and Sony Pictures movies is exactly how Starz was able to ramp up their service and compete with entrenched players like HBO and Showtime.



Try reading the comments from Netflix subscribers sometime. Anytime this kind of speculation arises, all hell breaks loose. They don't "know this." They actually expect this dirt low pricing to continue indefinitely. I'm simply laying out the reality that Netflix's costs are spiraling out way faster than their subscriber growth.



Because those are new or recent releases, which people are willing to pay more for. If you actually subscribe to Netflix (like I do), or bother to check up on what Netflix offers, you'd know that Netflix does not carry new releases.



And what does any of this have to do with Netflix's escalating content costs?



And cable, satellite, and UVerse all offer up programming options that aren't available on Netflix. If you watch sports, are you going to cancel cable and rely just on Netflix and OTA broadcasts?

Right now, Netflix offers up older movies and TV shows on demand for $8/month. Well worth that price, and a great alternative to the video store or kiosk on nights I'm not looking for new releases. But, no way would it replace what I watch on satellite.



And more and more products now also come with Amazon Cinema, Vudu, Google TV, and any number of other competing services. Competition and escalating costs are Netflix's issues.



Marketing is also a huge cost, and in Netflix's case, an escalating one. Once any subscription service reaches a certain point, then the customer acquisition costs go way up, because all of the low hanging fruit has already been picked.

When you look at the competition that Netflix has gnawing at its heels, they all have much healthier cash positions and far larger revenue. They also have other platforms that they can leverage to ramp up their video streaming services. Compared to Amazon, Google, or Microsoft, Netflix is the baglady.

If you could analyze data as well as you dig it up you would be something else.
YOU ARE LIKE the weatherman who was trying to figure out what
all of that wet stuff was falling out of the sky, couldn't be
rain because the "stats" said rain was impossible.
NETFLIX has a huge audience and a low price tag, that gives
them more moves than BRUCE lee.
Its really as simple as that. TRUE, THEY COULD SCREW UP,
but if they were that stupid they wouldn't be where they are,
which is one of the commonsense facts you are in the habit of overlooking.
SOMETIMES ITS BRIGHT OUTSIDE for a simple reason , like
its twelve noon. No reason to assume a nuclear war is going on.
And no offense, but you do this stuff all of the time, say the sky is falling because a drop of water hits you on the head.
NETFLIX could raise their rate five bucks, get a huge revenue increase, with little loss of market share.
DO YOU know how many tossed over dialup when CABLE
modems came out at five times the cost?
ABOUT A ZILLION.Sometimes quality beats cost, and NETFLIX
is only EIGHT BUCKS!!!. Not even the price of one movie
ticket some places!
The other companies you mention don't have
near as much experience in the field, their experience elsewhere doesn't translate.
NETFLIX may have trouble if they take a bunch of stupid pills, but thats what it would take.:1:

[Woochifer]

If you could analyze data as well as you dig it up you would be something else.
YOU ARE LIKE the weatherman who was trying to figure out what
all of that wet stuff was falling out of the sky, couldn't be
rain because the "stats" said rain was impossible.

:lol: So this is your response when you don't have facts to challenge anything that I've written up? Try again. Fail again. Rinse. Repeat. Dig up more pictures. Copy and paste some more. Yeah, we know your game here. :19:


NETFLIX has a huge audience and a low price tag, that gives
them more moves than BRUCE lee.

They have the huge audience BECAUSE of the low price -- a low price that cannot be sustained at the rate that their costs have escalated, and with their stated intention to acquire more recent releases and develop original programming.

Their CEO has already indicated that they're willing to pay $200 million a year to bring Sony's movies back to Netflix -- their current rights fee is $30 million a year. Meanwhile, Starz/Liberty Media is purportedly ready to demand $350 million a year. So, Netflix must either pay a lot more or continue to have thousands of movies and TV shows delisted from their streaming library.


Its really as simple as that. TRUE, THEY COULD SCREW UP,
but if they were that stupid they wouldn't be where they are,
which is one of the commonsense facts you are in the habit of overlooking.

So, what am I overlooking?
Costs rising faster than revenue growth - fact.
Deep pocketed competitors entering the video streaming market - fact.
Thousands of titles can disappear from Netflix's library the instant a carriage dispute or contractual issue arises - fact
History of the studios negotiating higher rights fees in exchange for exclusive content access - fact


SOMETIMES ITS BRIGHT OUTSIDE for a simple reason , like
its twelve noon. No reason to assume a nuclear war is going on.
And no offense, but you do this stuff all of the time, say the sky is falling because a drop of water hits you on the head.

And sometimes facts are facts, no matter how much you like to ignore them.


NETFLIX could raise their rate five bucks, get a huge revenue increase, with little loss of market share.

Not if Amazon's offering up the same thing for $7/month, which they already do. And they're purportedly readying an improved video subscription service in the fall.

Netflix is gambling that their subscribers will be willing to move into higher price tiers for more access to recent releases, and to watch their original programs.


DO YOU know how many tossed over dialup when CABLE
modems came out at five times the cost?
ABOUT A ZILLION.

:out:


Sometimes quality beats cost, and NETFLIX
is only EIGHT BUCKS!!!. Not even the price of one movie
ticket some places!

And again, how much longer can they afford to do this with their existing costs going through the roof, and their intention to boost their costs even higher by shortening their release window and producing original programming?

Their current business plan is putting them into an entirely different revenue and pricing structure.


The other companies you mention don't have
near as much experience in the field, their experience elsewhere doesn't translate.

Amazon, Microsoft, and Apple have all been doing online video longer than Netflix. They have existing relationships with the studios, in-app purchasing, content, and streaming platforms already in place. Moving to streaming subscriptions would be a simple changeover for all of them. And Amazon already has the streaming deals in place, they're just negotiating the time windows and building up the streaming library.

[pixelthis]

:lol: So this is your response when you don't have facts to challenge anything that i've written up? Try again. Fail again. Rinse. Repeat. Dig up more pictures. Copy and paste some more. Yeah, we know your game here. :19:



They have the huge audience because of the low price -- a low price that cannot be sustained at the rate that their costs have escalated, and with their stated intention to acquire more recent releases and develop original programming.

Their ceo has already indicated that they're willing to pay $200 million a year to bring sony's movies back to netflix -- their current rights fee is $30 million a year. Meanwhile, starz/liberty media is purportedly ready to demand $350 million a year. So, netflix must either pay a lot more or continue to have thousands of movies and tv shows delisted from their streaming library.



So, what am i overlooking?
Costs rising faster than revenue growth - fact.
Deep pocketed competitors entering the video streaming market - fact.
Thousands of titles can disappear from netflix's library the instant a carriage dispute or contractual issue arises - fact
history of the studios negotiating higher rights fees in exchange for exclusive content access - fact



and sometimes facts are facts, no matter how much you like to ignore them.



Not if amazon's offering up the same thing for $7/month, which they already do. And they're purportedly readying an improved video subscription service in the fall.

Netflix is gambling that their subscribers will be willing to move into higher price tiers for more access to recent releases, and to watch their original programs.



:out:



And again, how much longer can they afford to do this with their existing costs going through the roof, and their intention to boost their costs even higher by shortening their release window and producing original programming?

Their current business plan is putting them into an entirely different revenue and pricing structure.



Amazon, microsoft, and apple have all been doing online video longer than netflix. They have existing relationships with the studios, in-app purchasing, content, and streaming platforms already in place. Moving to streaming subscriptions would be a simple changeover for all of them. And amazon already has the streaming deals in place, they're just negotiating the time windows and building up the streaming library.

pitiful.:1:

[Woochifer]

pitiful.:1:

Perfectly apt description for your reply ... or rather lack thereof! :lol:

[GMichael]

This thread is sure getting hit with a lot of spam. But check out the teamwork!
Great job guys.

[pixelthis]

This thread is sure getting hit with a lot of spam. But check out the teamwork!
Great job guys.

LIKE the sign in the bathroom...It pleases us if you aim!
I LIKE Wooch, but he really needs to get a life.
NETFLIX IS IN TROUBLE like IBM is in trouble.:1:

[GMichael]

LIKE the sign in the bathroom...It pleases us if you aim!
I LIKE Wooch, but he really needs to get a life.
NETFLIX IS IN TROUBLE like IBM is in trouble.:1:

I worked at IBM. I can tell you that without a doubt, they are far from being the same company they used to be.
Netflix may not be "in trouble" but they too will not be the same.

[Woochifer]

I worked at IBM. I can tell you that without a doubt, they are far from being the same company they used to be.
Netflix may not be "in trouble" but they too will not be the same.

Yep, totally agreed. Netflix's trajectory with their new content deals, and plans to buy more recent releases and start producing original programming, is simply unsustainable under their current pricing structure. Even with their high subscriber growth, their costs have grown even faster. This all points to substantial revamping of their program tiers and pricing in the near future.

Just look at how HBO has evolved. They started out strictly as a movie channel, but branched out into several different programming niches with their own original productions. Now, the vast majority of their viewers subscribe to HBO because of its original programs. Netflix's high bid on the new Kevin Spacey series, and bankrolling a few indie films, indicates that they are following the path that HBO and Showtime have taken.

The upside to Netflix's strategy is that they can pick up more subscribers by carrying newer programs and producing their own programs. These subscribers will likely be more willing to pay higher subscription fees for a more upscale product than Netflix's current offerings.

The downside is that they have a very price sensitive base of existing subscribers that might dump the service at the first sign of a fee hike, or defect to a different streaming service such as Amazon. These include subscribers that don't pay for TV and might be otherwise content to torrent their movies.

It also includes people like me who already subscribe to cable/satellite and look at Netflix as a nice convenience, but nowhere near suitable to replace cable altogether. For the viewing habits of most people, Netflix is actually more expendable than cable, because it does not yet feature live or original programming.

[mlsstl]

I worked at IBM. I can tell you that without a doubt, they are far from being the same company they used to be.
Netflix may not be "in trouble" but they too will not be the same.

NO company, whether IBM, ATT, GM, Netflix or any other is a static entity that never changes. They all evolve and change due to new technology, competition, politics and government intervention and choices made by consumers.

Suggested reading: "The Master Switch" by Tim Wu. It goes back to the mid 1850s when Western Union was the monopoly provider for telegraphs and considered the telephone a toy not worthy of their consideration. That didn't turn out well for them.

Netflix has some issues to face. Bandwidth limiting by internet providers who want to keep consumers hooked up to their cable, satellite or U-Verse. The issue of content availability and pricing. Consumer acceptance. Management decisions.

In another book, "The Poets of Tin Pan Alley" by Philip Furia, in 1941, ASCAP tried to play hardball with the radio stations for the renewal of their broadcast rights. ASCAP wanted double royalties when a radio station played copyrighted music. The radio stations called their bluff, quit playing ASCAP music and started BMI which scoured the country for "new" music. Country and black musicians were featured (along with public domain material) and the new music became popular. We now have rock n roll as an unintended consequence of ASCAP's arrogance in thinking they had an unbeatable position. They lost big time in 1941.

As many examples in the book illustrate, it is harder to predict what will happen than do an autopsy afterwards. I won't be placing any large bets

[limonv]

great thread