Analyst: Expedited Starz/Netflix Deal Likely in Early 2011

7 Dec, 2010 By: Erik Gruenwedel

Netflix’s much-needed renewal of a content license deal with Starz Entertainment could occur as early as the next 90 days — months before the current agreement expires in the third quarter 2011, an analyst said.

Netflix scored a coup of sorts when it signed with Starz in 2008, a deal that afforded it rental access to Disney and Sony content. The new agreement would factor heavily in streaming, a reality that is bound to cost Netflix a lot regardless of when it is consummated.

Richard Greenfield, with BTIG Research in New York, said the prospect of Netflix losing access to 50% or more of it “freshest” movies mandates the Los Gatos, Calif.-based online disc rental pioneer strike a deal as quickly as possible. The analyst believes a new Starz agreement will cost Netflix upwards of $250 million annually, up from $30 million a year it currently pays.

“While we believe the benefits to Starz from waiting to negotiate still exist (related to increasing competition), we sense Netflix’s rapid growth is creating a requirement for all parties to sit down and renegotiate sooner than later,” Greenfield wrote in a .

Starz could also elect not to license content to Netflix, opting instead to secure content to presumed streaming competitor Amazon — a move Greenfield considers remote.

“We expect a new deal with Netflix to generate healthy incremental revenues for Starz and its content partners (Disney and Sony),” he wrote.