It's About Choice, but Media Content Providers Just Don't Get it
Starz was one of the first if not the first major content provider to sign a deal with Netflix four years ago which helped bolster the Instant Watch feature - aka Netflix's streaming video offering. At that time, streaming video was still in its infancy and no one, especially the content providers, had any idea where it was going.
Fast forward to 2011 and we've all seen how the consumer has flocked to the idea of instantly viewable streaming content on a wide variety of devices. So much so that Netflix changed their pricing structure to encourage the use of their streaming video service more so than electing to have physical DVDs shipped to the consumer's door. Competitors have figured out that Netflix hit upon a gold mine and have been aggressively attempting to catch up and cash in.
Content providers, unfortunately, can't seem to clearly wrap their heads around streaming video, even today. Hence the issue with Starz and Netflix not being able to reach a deal on renewing their content contract. By some accounts, the original deal between the two parties was worth around $30 million per year. This time around, Netflix was prepared to offer up to $300 million per year. That, however, wasn't good enough for Starz.
As is common in the cable television world, Starz went backwards instead of being forward thinkers and wanted a tiered structure for content. Part of the foundation that has made Netflix so successful is a simple business model. The consumer pays a flat rate per month for a wide selection of content. Starz felt that their higher quality content should command a higher premium, thus the tiered structure. This is the same craziness that is forced upon cable companies by the content providers which helps to continue the upward climb of monthly cable prices. If Netflix had agreed to such a setup, then the consumer would surely lose because availability of content would be unnecessarily confusing.
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