Netflix learned today that it may lose a significant source of its content when Starz Entertainment announced it would not renew its distribution deal with the popular streaming service for next year.
It's this contract with Starz that gives Netflix the ability to legally stream a trove of movies from the likes of Walt Disney, Touchstone, Columbia and Sony, among others. If talks don't resume, that's a sizable chunk of content that will be missing from the service. In response to the news, Netflix's stock price dropped 9 percent in after-hours trading.
"This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content," Starz CEO Chris Albrecht said in a statement. "With our current studio rights and growing original programming presence, the network is in an excellent position to evaluate new opportunities and expand its overall business."
This move is just the latest example of tension between traditional content providers and the Internet companies who seek to revolutionize the way entertainment, news and other media are consumed. With Netflix, legacy players have long been nervous that the service's all-you-can-eat media consumption model would erode DVD sales, cable subscriptions and other traditional sources of revenue.
The Starz announcement happened to come on the same day Netflix officially rolled out its controversial new pricing plans. The company is eliminating its $9.99 plan that enables customers to both stream content and recieve DVDs by mail. To continue to do both, customers will have to pay $15.98 per month, an increase that was wildly unpopular when it was first announced in July.