Netflix Removes Sony Movies, Citing Sony-Starz Dispute

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Netflix last week pulled Sony Pictures Entertainment movies from its Internet-streaming video-on-demand service, citing a "temporary contract issue" between Sony and Starz for the suspension.

"[W]hile these two valued partners work through their differences, we hope you are enjoying the wide variety of new movies and TV shows added daily," Netflix vice president of content acquisition Pauline Fischer wrote in a post on the Netflix corporate blog last Friday.

"Sony movies have been taken down temporarily from the StarzPlay service on Netflix. All parties are working diligently to resolve the issue and return these films to Netflix members," Starz said in a statement.

According to a source familiar with the current terms of the Netflix-Starz deal, the number of Netflix U.S. streaming subscribers in the first quarter of 2011 triggered a clause in Starz's deal with Sony that would escalate per-sub payments for Sony movies.

Netflix had 22.8 million customers in the U.S. at the end of March, versus 19.5 million at the end of 2010.

Sony Pictures Entertainment declined to comment on the Netflix matter.

Starz and Netflix are in the midst of renegotiating a content-distribution deal, with their original three-year pact set to expire in the first quarter of 2012. Sources indicated Starz and Sony are seeking to reach a resolution prior to that.

"We suspect Starz wants to have a sense of what its new Netflix deal looks like, before it renegotiates with Sony in terms of how much of the dollar upside goes to Sony vs. Starz," BTIG analyst Rich Greenfield wrote in a post Friday about the Netflix suspension of Sony titles.

Meanwhile, Starz this spring said it would begin withholding original series from the Netflix streaming queue until 90 days after they debut on the TV network, with first-run movies to follow suit later.

Netflix CEO Reed Hastings has suggested the Starz renewal could cost $200 million to $300 million per year, up from an estimated $30 million annually under the original agreement. 

Last year Netflix struck a deal worth $1 billion over five years with Epix, the joint venture of Paramount, Lionsgate and Metro-Goldwyn-Mayer. 

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