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Starz CEO Calls Former Netflix Content License Deal 'Terrible'

10 Dec, 2014 By: Erik Gruenwedel

Hindsight can indeed be 20/20 when it comes to criticizing an unstoppable industry phenomenon such as Netflix.

That’s what Starz CEO Chris Albrecht did when he criticized the pay-TV channel’s former content licensing deal with Netflix. That five-year pact, which Albrecht did not renew in 2012, afforded Netflix access to theatrical movies from Walt Disney Studios and Sony Pictures, among others, for a relatively minor $30 million annually.

Critics contend Netflix woefully underpaid for content it used to jumpstart a pioneering subscription streaming business model in 2008. In reality, Netflix paid market value for content in a nascent (streaming) distribution channel no one understood or appreciated at the time.

Speaking Dec. 9 at the UBS 42nd Annual Global Media and Communications confab in New York, Albrecht characterized the agreement as “terrible,” and chastised media companies today for leveraging traditional distribution business models in search of the quick SVOD dollar.

“Look, Starz made a terrible deal with Netflix. You could argue Netflix built a lot of its business on the back of Starz programing,” Albrecht said.

The CEO said it is “really shortsighted” for networks today to be selling their TV shows to Netflix.

“If they didn’t, what would be on Netflix? A lot of old movies, some Disney movies in a couple of years and a few shows they make,” Albrecht said. “[But] it’s hard to turn down the [money] they’re paying.”

He said he doesn’t view Netflix as a competitor, but more as an alternative product. Albrecht said internal data suggests the majority of premium channel consumers also subscribe to Netflix.

With increasing numbers of households downsizing their cable bill, coupled with new consumers dealing with constricted home entertainment budgets, Albrecht said it is vital Starz gets its product “more” direct to the consumer.

Specifically, the CEO said the influx of millennials and Latinos to over-the-top video mandate high-speed Internet connectivity and access to premium content and brands, including Starz, HBO and Showtime.

“It’s not just who exists now [as a subscriber], but who is coming into this household formation and making those choices,” Albrecht said. “And who knows how big that market is going to be. But they are a lot less likely … to have that big video bundle, and a lot more likely to look for broadband-delivered product.”

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