Netflix stocks took a big hit from two significant changes to the company’s service today. First, their controversial new pricing structure went into effect. Customers who want both DVDs through the mail and unlimited streaming will see a 60 percent price increase. Perhaps worse was the other news of the day: premium cable channel Starz announced that it will not renew its distribution deal with Netflix, which will expire in February 2012. The cable channel supplies Neflix with both Sony and Walt Disney films so the blow is significant, though Netflix says that Starz only accounts for about 8% of its subscribers’ viewing.
The news about Starz pulling out of its deal with Netflix comes as uncertainty continues to swirl around the other online streaming film and television service, Hulu. Hulu is a joint venture of NBC Universal, Fox Entertainment, and ABC, which is part of Disney. But early this year both Fox and Disney discussed pulling their content from Hulu and the company is up for sale. Most recently, Fox started holding back new episodes of its TV shows from Hulu—resulting in a surge of pirate downloads of those shows, but also making Hulu look even shakier.
It’s clear that even as more and more companies move “into the cloud”—with Amazon, Google and Apple all launching cloud music services, and even the Federal government committing to working in the cloud—the film and TV industry is becoming increasingly wary of streaming video services like Hulu and Netflix, seeing potential revenue streaming away under new models of viewership in which they have less control.
No doubt they are investigating new models that will give them a greater share of the revenues, just as magazines and newspapers (such as the Financial Times) are doing in relation to Apple’s iTunes pricing schemes. That may mean going it alone. In the short term, though, what it will probably mean for viewers is being stuck with the old models, and in particular with cable television.
- Netflix Price Increases Take Effect Thursday – The Hollywood Reporter.
- Starz to End Streaming Deal With Netflix – NYTimes.com.
- Hulu, Billed as Tomorrow’s TV, Looks Boxed In Today – NYTimes.com.