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/ente...-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

[Woochifer]

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

I smell a price increase

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.

[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.

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.

[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.

[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]

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.

[limonv]

great thread