In a short article today, The Los Angeles Times sheds some fascinating light on the failed negotiations that will result in Netflix losing streaming movie and TV content from Starz at the end of February. Nextflix, the paper said, offered $300 million a year to extend the agreement, but Starz wanted nothing less than a change in Netflix’s one-price, all-you-can-eat business model. It wanted Netflix to charge premium prices to viewers who wanted the Starz content.
In recent Tech.pinions posts, Ben Bajarin, Patrick Moorhead, and I have all argued, in somewhat different ways, that winning the cooperation of the studios who control content is the key to realizing the potential of the convergences of information technology and entertainment. But the Starz move, and other developments such as Fox Television’s decision to withhold new episodes of its shows from Hulu.com for eight days, show that if anything, Hollywood is becoming more resistant to anything that challenges its traditional distribution.
On one level, it’s difficult to argue against the Hollywood position. The studios do not face the challenges that record labels did a decade ago. The DVD business is crumbling and theatrical distribution, while healthy, is showing slow growth at best, relying mainly on ever-rising ticket prices to drive revenue. But “broadcast” TV (I use quotes because relatively few people see these shows through over-the-air broadcasts anymore) is holding up well, and cable on-demand and premium channels are thriving. The studios know they are fighting a historical tide, but for the time being, they don’t see various forms of internet distribution replacing the revenues that they stand to lose from their existing business models.
Starz is owned by Liberty Media, whose chairman, John C. Malone, and CEO Gregory B. Maffei, are about as smart and as tough as they come. (If you ever get into a negotiation and see Malone on the other side of the table, run. This is the guy who made a fortune selling cable operator Tele-Communications Inc. to AT&T and another fortune as AT&T spun out Liberty Media when it sold its cable operations to Comcast. AT&T took a bath, and Malone made money on both ends of the deal.) I would not dismiss them shunning the Netflix money as the act of foolish Luddites who can’t see what’s coming.
No one much likes their cable company and the notion that we will eventually be able to pick and choose the content we want from the internet is an appealing one. But I think would-be cord-cutters who don’t want to give up current, premium content are going to have to wait at least a few years–and real innovation in entertainment content delivery will probably have to wait with them.