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Netflix CEO: Starz Renewal Isn't Critical

12/08/2010 5:25 PM Eastern

Netflix is hoping to renew its deal with Starz Entertainment to offer streaming video of movies but "we can live without it if we have to," CEO Reed Hastings said at an investment conference Wednesday.

"They have content, we have money," said Hastings, speaking at the Barclays Capital 2010 Global Technology Conference in San Francisco. "Unless we're idiots we ought to be able to find some way to make it work over the next couple years."

However, he added, "there's no one piece of content that is essential for us." One year ago, no single content provider represented more than 20% of Netflix's streaming-video viewing, Hastings said, and since then the company has expanded its content.

Starz in October 2008 announced a three-year streaming deal with Netflix, reported to be worth in the range of $20 million to $30 million, which runs through 2011. The deal gave Netflix the ability to stream movies from Walt Disney Co. and Sony Pictures Entertainment, among other content.

Starz declined to comment on Hastings' remarks.

At Liberty Media's investor day in New York on Oct. 1, Starz president and CEO Chris Albrecht also said renewing the Netflix deal was "not a necessity," noting, "It would be wise for us to look carefully at the decisions we're making and [their] impact for the long term."

Netflix had $1.2 billion in commitments for streaming content deals as of Sept. 30, 2010, according to a filing with the Securities and Exchange Commission. This summer Netflix reached an agreement with Epix, the joint movie venture of Paramount Pictures, MGM and Lionsgate, reportedly worth nearly $1 billion over five years.

Netflix's major focus at this point is adding TV shows to its streaming lineup, Hastings said. Earlier Wednesday, Netflix announced an expanded deal with Disney-ABC Television Group, including content from Disney Channel and now ABC Family.

Under the new deal with Disney-ABC, Netflix for the first time will offer episodes from some in-season TV shows -- but with a 15-day delay after they air on linear TV. The companies did not specify which current series Netflix will have rights to.

"TV shows dominate movies in total viewing if you look at consumers in America. And we're kind of catching up," Hastings said. "I think with the ABC deal what we're showing is we can continue to pay enough money to make it compelling for content owners."

Netflix has been at the center of a recent dustup between Comcast and network services provider Level 3 Communications. Level 3, after inking a deal to become a primary content delivery network for Netflix, accused Comcast of putting a "toll booth" on the Internet by charging interconnection fees to handle the increased amount of traffic. Comcast has said Level 3 simply wants to avoid paying standard CDN fees.

Asked about network neutrality, Hastings said, "It doesn't matter per se if the FCC accomplishes what they're trying to do. What matters is that there's broad public support for net neutrality. Because then, if some ISP cuts off Netflix or iTunes, or pick your favorite, there will be a public outcry and Congress will act. So as long as there's a lot of public support for open access, neutrality in fact is practiced."

Meanwhile, usage-based pricing, in which Internet users are capped at a maximum monthly amount of data they can download and charged for anything extra, "doesn't particularly scare us," Hastings said. He said most typical usage-based pricing plans in Canada, for example, are "pretty generous."

Hastings sees very broad competition, ranging from cable networks to Redbox, but he denied that Netflix competes directly with HBO, Showtime Networks or Starz. "We compete a little bit for time and money [with the premium movie channels] but about like NFL and MLB compete," he said. "It's as distinct as baseball and football in its substitutability and difference."

Netflix is continuing to see subscriber growth of more than 50% year over year in the U.S., he said. "Does it saturate at 100 million [subscribers], does it saturate at 40 million -- it's unclear," Hastings said. "What is clear is that our growth is accelerating."

Also speaking at the conference was Netflix chief financial officer Barry McCarthy, who is leaving the company to pursue other business opportunities, the company announced Tuesday. But he said he was not going to a Netflix competitor: "The first place I'm going is Hawaii," he said.

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