Blog Post

The real reason Sony movies disappeared from Netflix

On the Netflix blog Friday morning, VP of Content Acquisition Pauline Fischer reported that Sony Pictures (s SNE) 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 (s nflx) 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 (s lstza) 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.”

9 Responses to “The real reason Sony movies disappeared from Netflix”

    • Ryan Lawler

      @Jay – I asked the same question. The reason for this is that Sony movies on Comcast’s Xfinity online offering are authenticated — ie they’re counted as part of your cable subscription. This cap has to do with online-only distribution agreements; TV Everywhere agreements are subject to the same clause, since viewers are also cable subscribers.

  1. A coincidence that less than a week ago Netflix changed its streaming interface to remove sorting by rating and year? I presume they purposely want to make it harder for users to find the good/new movies to avoid such contract issues. It’s the only explanation I can fathom for destroying user-experience.

    • You’re joking, right? The Other Guys? Salt? Grown Ups? Those are neither the newest or best content available at all. They’ve been out for a couple months apiece, and all three movies are terrible. Only Karate Kid and The Social Network are decent enough to be considered. And Karate Kid is stretching it.

      • Ryan Lawler

        @DW – Regardless of your own tastes, these are new release films that some people would like to watch. Having new releases is one of the big selling points of Netflix’s Starz deal, since there’s no other way to watch those movies online without a cable subscription.

      • @Ryan Lawler – Thanks for the response. Its not often people will bother doing so. That being said, aren’t each of the movies mentioned something you personally picked out of many new release choices by Sony available (until recently) for Instant Viewing via Starz Play on Netflix? By singling them out haven’t you also put your tastes over the main idea that they’re a selling point? I seem to remember seeing less commercially advertised (thus lesser known) new choices available as well that have gone without mention. And, there are other ways to watch new movies online. Amazon has several quality new releases for digital rent or purchase. While not as cheap as Netflix deal its still an available method to view new movies without a cable subscription. Personally I use both services, because sometimes one has something the other does not, and vice-versa. But to say there’s no other way to watch new Sony movies online is a bit misleading.