Last Friday, more than 250 Sony Pictures films disappeared from the Netflix online streaming service. But it's not just Sony or Netflix that's to blame—as it turns out, the movies were pulled because of agreements with pay-cable channel Starz.
As part of Starz’s agreements to carry Sony and Walt Disney movies on its TV channel, it also acquired online rights to its films. In 2008, Starz signed a four-year deal with Netflix to carry its content, covering more than 1,000 movies per year. The deal is set to expire in the first quarter of 2012.
Included in the Starz-Sony arrangement is a clause that, according to sources who spoke to the Los Angeles Times, includes an undisclosed cap on the number of people who can watch Sony movies online. That cap, they say, has recently been exceeded—which caused those 250-plus films to be removed from Netflix. In order to get all of Sony’s movies back on the streaming site, Starz will need to renegotiate the terms with the studio and is likely to seek higher payments from Netflix, says the L.A. Times.
Starz could also have a similar problem with its Disney agreement. According to a source, once the number of Netflix subscribers streaming content online exceeds 20 million, which is likely to happen soon, Starz will have to pay Disney close to 20 cents per month for each additional subscriber.
Renewing its deal with Starz could be crucial for Netflix, says the L.A. Times, because Starz is one of only two sources that provide the site with movies less than seven years old. But Netflix will have to decide whether it's worth a possible $200 million annually to keep the pact afloat.