Starz CEO Albrecht Does Others A Big Favor

by , Nov 22, 2011, 8:56 AM
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Top executives at content-creation engines should make sure they send Chris Albrecht a holiday card. Looking out for his own interests, he nonetheless did them a big favor by moving to cut ties with Netflix early next year.

Last week, the Starz CEO said giving Netflix continued streaming access to Disney and Sony films would have “eroded quickly and in big chunks our core business.” Even as pay-cable Starz tries to create tentpole original series, movies are still a valuable part of its offering, so it opted to forgo hundreds of millions by renewing a deal with Netflix.

By doing that, Albrecht no doubt helped put hundreds of millions into other media companies’ pockets. While Netflix says content from Starz accounts for less than 10% of its U.S. consumption, that’s still a pretty decent amount it needs to replace.

So, other movie studios will benefit, but likely more so TV producers from AMC to Discovery to NBCUniversal. In order to continue with premium offerings, Netflix now is writing big checks to those and others.

Those deals likely would have been made even with a Starz renewal. Netflix has indicated it believes its future lies in offering loads of episodes of TV series, so it needs massive libraries. But if Netflix knew it would continue to have Sony and Disney films, it might have gained negotiating leverage with studios and networks.

Maybe it could at least try to cut fewer non-exclusive deals, which allow content owners to simultaneously collect a check from Netflix and Amazon and other challengers.

Starz' Albrecht has opened the door for that multiple-dipping to continue. Speaking with investors, he indicated he was mindful of not wanting to contribute to a Netflix hegemony when refusing to re-up. 

Had Netflix had a long-term deal locking up Disney and Sony new releases, he suggested Netflix would have had enough muscle to thwart competition with similar online-streaming models. “We would have made it almost impossible for anyone else to come into this space,” he said.

Now, Starz could help an Amazon or Blockbuster or new player. Albrecht said Starz is in active discussions with a range of distributors, suggesting there are some potential new entrants.

“I firmly believe there is a business that other people will (enter),” he said. (Starz could just keep rights to itself as exclusivity grows in value.)

One intriguing possibility Albrecht suggested would have distributors creating premium offerings for broadband-only subscribers. So, crazy as it might sound, a Comcast or Time Warner Cable could make special packages available to broadband subscribers for a price that undercuts Netflix.

There would have to be some tinkering to not encourage cord-cutting, but Albrecht is certain a model exists that can bring a net positive. As it stands, people struggling economically can be quick to cancel pay-cable channels, but a cable operators may be able to pick up customers with some sort of broadband programming tier.

"This is an idea that we love," Albrecht said.

If it gains steam, he would be entitled to more thanks from his fellow content creators, since there would only be more check writers.

As Albrecht spoke last week to investors, he knew many continued to harbor skepticism why Starz would go out of business with Netflix when others seem to be rushing to sign on -- and crowing about their found money.

He said he has “tremendous respect” for Netflix and wishes them well, but that Starz made “a big-boy choice," a "grown-up choice” and every day he's "more certain” it was the right choice.

Right or wrong for Starz, it was right for other content creators.

 

 

 

 

 

 

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