UPDATE: Sony Pulls Movie Streams From Netflix17 Jun, 2011 By: Erik Gruenwedel
New report says Starz pulled Sony content after reaching IP distribution cap
A new report says Starz Entertainment, not Sony Pictures Home Entertainment, quietly pulled the studio's movies from Netflix’s streaming queue after reaching an IP distribution cap.
Citing "a person with knowledge of the situation," Ryan Lawler, reporter with Gigaom.com, said there is a clause in the distribution agreement between Sony and Starz mandating a limit on the number of streams a subcontractor (Netflix) can deliver. Lawler wrote that Starz likely never anticipated the explosive growth for Netflix streaming.
"They hit a limit on the number of subs that could view their IP video streams," Lawler wrote in an email.
In a June 17 post on Netflix’s blog (blog.netflix.com), Pauline Fischer, VP of content acquisition with Netflix, would only confirm a situation between two “valued” content providers without elaboration.
Indeed, Sony’s top-grossing films since 1984, which include Spider-Man, Spider-Man 2, Spider-Man 3, Men in Black, Ghostbusters, Hancock, The Da Vinci Code, Terminator 2: Judgment Day, Men in Black 2 and Hitch, are available on Netflix only via DVD and/or Blu-ray Disc. More recent titles pulled from streaming include Salt, The Karate Kid and The Social Network.
Starz, which distributes Sony and Disney movies, among others, to multichannel video distributors such as cable and satellite TV, sub-licensed content to Netflix streaming several years ago for about $30 million annually.
That agreement — now widely panned by media executives as a give-away to Netflix — expires early next year. Renewal is expected to fetch Starz a tenfold increase in license fees from Netflix.
Richard Greenfield, analyst with BTIG Research in New York, June 17 said the pullback by Sony appeared to be due to a clause in the original output deal as it relates to digital rights and the number of third-party (Netflix) digital streaming subscribers created.
Netflix’s burgeoning subscriber growth (and stock valuation) throughout the past few years has been due to its market-leading streaming service.
“We suspect Starz wants to have a sense of what its new Netflix deal looks like, before it renegotiates with Sony in terms of how much of the dollar upside goes to Sony versus [them],” Greenfield wrote in a post.