Netflix's rough weekend: Sign of things to come through October

Netflix's rough weekend: Sign of things to come through October

Summary: Netflix has had a rough few days with a Web site outage and a contract dispute that led it to pull Sony movies from its streaming service. These two issues independently aren't a big deal, but they do highlight how Netflix is under more scrutiny as it grows.

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Netflix has had a rough few days with a Web site outage and a contract dispute that led it to pull Sony movies from its streaming service. These two issues independently aren't a big deal, but they do highlight how Netflix is under more scrutiny as it grows.

On Friday, Netflix noted in a blog that it had to pull Sony movies through its Starz streaming service. Starz reportedly can't stream Sony films beyond a certain subscriber mark. Netflix's big coup as a young company was landing Starz as a partner because the move bolstered its streaming library. Starz will be a primary focus going forward since Netflix will have to renegotiate the contract.

Netflix CEO Reed Hastings recently said that a $200 million price tag for a new Starz deal wouldn't be surprising. Wedbush Securities analyst Michael Pachter said Starz may seek more than that sum and the New York Post reported that the cable network wants $350 million. Pachter estimates that Netflix currently pays $30 million a year.

Why make a fuss over Sony disappearing from Netflix? It's a sign of things to come. Netflix has become a massive distribution channel. In many respects, Netflix is a cable network. Cable networks sometimes pull content over disputes. With the Netflix-Starz deal expiring in October there will likely be some threats ahead that could damage the $7.99 a month streaming content service.

Pachter said in a recent research note:

We believe that the Starz deal is the most high-profile of the five deals that provide Netflix with new movie streaming content. If Netflix were to lose Starz, the quality of its streaming content would suffer, and a loss of this content would potentially cause existing Netflix customers to defect. At the same time, several Netflix competitors are beginning to offer unlimited viewing for a monthly subscription fee, such as Hulu Plus (which costs $7.99/month, and focuses on new TV shows, but also has some catalog movies) or Amazon (which is free for Amazon Prime customers and focuses on catalog items). We fully expect a subscription offering from Amazon later this year.

The second half of Netflix's weekend revolved around a Web outage that affected a few users. Netflix's outage got some play on TechCrunch and the company's Twitter feed tells the tale.

The upshot: Netflix is now in Google territory. If Google's site hiccups the world notices. If Gmail burps it's a lead Techmeme story. Welcome to the land of intense scrutiny Netflix. Things are likely to get worse right through that October Starz contract expiration.

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10 comments
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  • If Sony / Starz decide to get too greedy

    plenty of other studios will happily underbid them seeing that Netflix has now proven they can make money for these studios.
    Will Pharaoh
    • But then you don't get the Sony movies.

      @Will Pharaoh

      It is about content. I have no idea why people think content should be free. From movies to songs, people have become unwilling to think artists and investors in those artists should do their work "for the love of art".

      Personally, I have always thought NetFlix's selection of movies was poor and they never seemed to have the movies I was interested in watching. But lots of people seem to be happy with the service.
      Bruizer
      • RE: Netflix's rough weekend: Sign of things to come through October

        @Bruizer Have you checked out their streaming collection recently? I'll admit that when it came out and for about a year after that it was absolutely terrible and worthless, but within the last year it has really gotten better and has tons of great content on it.
        vel0city
  • RE: Netflix's rough weekend: Sign of things to come through October

    As more customers are buying Fiber to the Home FTTH technology with broadband bandwidths greater than 10Mbs is clear that many cable networks like: DirectTV, Dish Network, AT&T Uverse, Verizon Fios, Xfinity are going to join Netflix in providing video/data services for home customers and Netflix won't be the only player in the game. It will be interesting to see the stock price of Netflix with these new players in this growing industry.
    Gabriel Hernandez
  • RE: Netflix's rough weekend: Sign of things to come through October

    In all honesty, I never watch the Starz content on Netflix for 2 reasons. 1, none of the titles are in HD, and 2, they are the most poorly encoded titles in the Netflix library by far. They look horrendous.

    Also, Hulu+ will never get my money for a subscription while they still force commercials upon me.
    ballkrussher
    • RE: Netflix's rough weekend: Sign of things to come through October

      @ballkrussher +1 on that. Keep your BS Hulu minus.
      timspublic1@...
  • RE: Netflix's rough weekend: Sign of things to come through October

    If Netflix want to get this settled, they need to pull streaming to the PS3. I'm sure Sony will come around then.
    dazzlingd
    • RE: Netflix's rough weekend: Sign of things to come through October

      @dazzlingd

      Why would Sony care if Netflix pulls its PS3 service? Sony makes no money from that, and I seriously doubt that anybody buys a PS3 solely for the Netflix......having Netflix on the PS3 helps Netflix, it doesn't do a thing for Sony.
      Doctor Demento
      • RE: Netflix's rough weekend: Sign of things to come through October

        @Doctor Demento I sure plenty of people use the service. I do on my PS3.

        However it would be the publicity that would force Sony to comply.

        Sony don't exactly have a good reputation at the moment.
        dazzlingd
  • RE: Netflix's rough weekend: Sign of things to come through October

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