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Netflix to Acquire Starz?

4 Jan, 2011 By: Erik Gruenwedel

The new year typically brings requisite resolutions (buy more DVDs) and assorted media predictions, including the premise that Netflix will buy pay-TV channel Starz Entertainment from Liberty Media.

The Los Angeles Times Jan. 4 went so far as to put a price on the projected sale: $3 billion.

The heady price becomes more “realistic,” considering analysts contend Netflix will be on the hook for about $300 million annually should it renew its license agreement with Starz, which expires in October.

Renewal of the deal, which currently costs Netflix about $30 million annually and grants the online disc rental pioneer access to Disney and select Sony titles, among others, could be completed as early as the first quarter.

Analyst Richard Greenfield with BTIG Research first mentioned the possibility of a Starz purchase by Netflix in a Jan. 3 post.

“Starz represents the single-largest piece of the movie segment and is critical for Netflix to maintain, especially if it wants to keep shifting its subscribers away from its DVD business,” Greenfield wrote.

Netflix CEO Reed Hastings has struck a defiant tone regarding a Starz renewal, going so far as to question its value going forward.

“We can live without it if we have to,” Hastings said last month at an investor event. “It is not essential to our success.”

Analyst Michael Pachter with Wedbush Securities in Los Angeles questions the wisdom of a Starz acquisition, which he said has little original content besides “Spartacus: Gods of the Arena,” and “The Pillars of the Earth,” among other lightly viewed series. He doubts Netflix would be interested in being saddled with alternative distribution channels beyond streaming and rental discs.

“Netflix is trying to compete with cable and if they owned Starz, it would be dependent upon cable/satellite for a huge chunk of revenues,” Pachter said.

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