The real reason Sony movies disappeared from Netflix

Those days of watching hours of Netflix together may soon end.

On the Netflix blog Friday morning, VP of Content Acquisition Pauline Fischer reported that Sony Pictures content was taken off the service due to a “temporary contract issue” between Sony and premium cable channel Starz.

The blackout of Sony movies on Netflix has removed popular new release films like Academy Award winner The Social Network, The Karate Kid, Salt with Angelina Jolie, Adam Sandler’s Grown Ups and the Will Ferrell-Mark Wahlberg movie The Other Guys, in addition to a wide range of library content from the streaming service.

So what’s the contract issue about? A person with knowledge of the situation says that Starz  had reached an IP distribution cap in its contract with Sony that resulted in Starz asking Netflix to temporarily take down the Sony content. The clause was part of the most recent deal between Starz and Sony, which likely didn’t anticipate the tremendous growth Netflix has seen for its streaming subscription service over the last few years. Netflix’s subscriber base has grown nearly 70 percent over the past year, from 14 million subscribers in the first quarter 2010 to more than 22.8 million subscribers in the U.S.

The takedown has occurred a few years after Netflix struck a deal with Starz to pay about $25-$30 million a year for access to its Starz Play streaming service, a deal that gave a big boost to Netflix’s streaming ambitions. The dispute also has arisen while as Starz and Netflix are renegotiating a deal to keep Starz Play titles on its streaming service. That renewal could be valued at more than $250 million, according to some estimates.

Netflix declined to comment beyond what was announced as part of the blog post, and Sony declined to comment as well. A Starz spokesperson, meanwhile, issued the following statement: “Sony movies have been temporarily taken down from the Starz Play service on Netflix. All parties are working diligently to resolve the issue and return the films to Netflix members.”

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