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Netflix Not Hurting Pay-TV Channels, For Now

2 Mar, 2011 By: Erik Gruenwedel

Netflix may not be the cord-cutting threat to multichannel operators, such as cable and satellite, as previously thought.

Thanks to racy original programming such as “Spartacus: Blood and Sand” last year and prequel “Spartacus: Gods of the Arena” this year, Liberty Starz Group reported fourth-quarter (ended Dec. 31) pre-tax operating income of $103 million, up 43% from pre-tax operating income of $72 million during the previous-year period.

Liberty Starz, which is a unit of Liberty Media Group, includes Starz Entertainment and Starz Media. The former concludes a $30 million annual content licensing agreement with Netflix later this year.

Netflix’s unstoppable subscriber growth and burgeoning market cap has largely been thought to be at the expense of cable and satellite, which until recently has seen subscriber declines.

Yet, Starz said it recorded its highest sub growth ever in Q4, generating 800,000 new members — and 1.3 million incremental subs in 2010.
And it achieved this with Netflix having access to both the Spartacus franchise and identical Starz catalog available for streaming and physical rental.

Richard Greenfield, analyst with BTIG Research in New York, said the results underscore a reality that despite perceptions among major TV networks of a so-called “Netflix drug” dependency to their bottom line, both distribution platforms can co-exist, for now.

“While multichannel video distributors have hated the Netflix/Starz deal from day one, it is hard to see any meaningful impact [to their bottom lines],” Greenfield wrote in a post.

Separately, Starz LLC CEO Chris Albrecht, in a Feb. 28 statement, said Starz would incorporate its recent multi-year distribution agreement with The Weinstein Co. to better leverage current physical sales and distribution through Anchor Bay Entertainment.

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