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.