Netflix Loses Starz: 5 Things to Know

The bad news just keeps coming for Netflix after contract negotiations with Starz broke down -- taking away a huge library of movies from subscribers.

Starz pulled its content and ended contract negotiations with Netflix to protect its premium brand and keep its own subscribers. Here's a look at the most important things to take away from this failed negotiation.

No More Disney Movies

One of the most valuable components of Starz's offering is its library of Walt Disney movies. Starz controls the pay-cable rights to Disney movies, which means Netflix subscribers will likely no longer have the pleasure of watching Lion King, Beauty and the Beast, or any other classic Disney movie through the service. Starz's deal with Netflix doesn't end until February 2012 - so there's still some time left -- but after that the movies will be gone.

No More Sony Movies, Either

Not only are Disney movies gone, but Sony's collection of films will also be off-limits for Netflix subscribers. Consumers have already experienced the loss of Sony movies -- the entire collection was pulled in July -- but early reports indicated it was just a matter of time before Sony's collection came back. Now it looks like Sony's collection will be gone for a long time, leaving consumers with even fewer movies to pick from.

Netflix Needs to Make a Move

Netflix has tried to downplay the importance of Starz but it's clear by the market's reaction -- its shares fell $19.97 to $213.30 in extended trading Thursday after the announcement -- that losing Starz is a big deal. Netflix has taken a bit of a beating this summer from its price hike, and the last thing it needs to do now is make already disgruntled subscribers even more angry. If Netflix expects subscribers to pay more, it needs to give them more, not less. Reaching a deal with a company like HBO, which has refused to partner with Netflix in the past, could go a long way to assuaging subscribers' fears.

Competition Licking its Chops

You better believe that all of Netflix's competitors are licking their chops seeing this announcement. As Netflix becomes increasingly vulnerable, competitive services like Amazon Prime or Walmart's Vudu see an opportunity to steal subscribers away and improve their bottom line. A recent Mashable article on Vudu's success showed it steadily gaining in the market and making a run at Starz, or an even bigger distributor could go a long way to knocking Netflix off its perch.

Distributor Negotiations Will Only Get Tougher

The Starz-Netflix negotiation collapse is another example of what is becoming a more contentious, high pressure battle in the distributor negotiation realm. More services, like Starz, are realizing the incredible value that they provide and are either demanding more money or simply pulling their products all together.

This makes it harder for services like a Netflix or a Hulu to hold onto what they have, while also continuing to keep up with consumer demands. Television show distributors are moving toward their own streaming services, which could leave the Netflixes and Hulus of the world out in the cold.