Netflix recently had to pull Sony films from the service that were provided to them by Starz. The reason is that Starz and Sony are renegotiating some contract and until it’s sorted, Sony films are no longer to be shown on Netflix. Now this could be because Sony is already set to lose some $3 billion this year and needs to recoup money wherever they can and they might feel that Starz sucker punched them when they offered up a massive pile of films to Netflix (who most likely paid a pretty massive amount).

Sony-Netflix The Latest Streaming Video Spat

The problem, according to reports, is the fact that Netflix pays a one-time licensing fee instead of a per view one (which probably works in the favor of those who supply the films since many of the titles are probably never or rarely viewed). We also hear that Sony might want to put a subscriber cap on availability so that once Netflix tops a certain number of subscribers, the films will be pulled and a new contract negotiated.

Yep, sounds like classic corporate greed to me. I mean seriously, they wrote up a deal, all parties agreed and now, probably because of the massive losses the company is scheduled to incur, they get cold feet, want to back out and start gouging cash out of Netflix? Poor form Sony! If you got your own house in order, you might not be in this current dire situation. Or, this could just be the limit of their tolerance as Netflix got so popular they bumped up against that limit in the contracts with Starz.

Now Netflix is a fair bit larger than they were when those original contracts were signed so I’m sure there needs to be some adjustment on a fairly regular basis and I’m sure Netflix isn’t against that either.

Some quick math tells me that with some 24 million subscribers paying either $7.99 or $8.99 a month, Netflix pulls down round $191.7 to $215.7 million a month… whoa. Well, I don’t know that all 24 million are actually paying monthly. I have been thinking that I might actually alternate Hulu Plus and Netflix subscriptions because I could watch one for a month, get all caught up and then watch the other for a month and catch up on content that’s there and not on the other. However, that would only really work if there was new content on a regular basis on both. And not only new content, but new content that I want to see. That also goes for Hulu as well.

If enough Netflixers think the same way, they might be in a fair bit of trouble if they don’t continue to get new content, so I’m sure they’re elbows deep in this discussion between Stars and Sony to make sure that they don’t lose gobs of content–which could then drive Netflixers straight to Hulu.

It seems that the crux of the problem is that Sony is unhappy with their share of it all and now want to be sure that Netflix isn’t making away with massive piles of cash and snickering behind their hands at Sony. Starz on the other hand seemed fairly content with the deal from the get go. The current Netflix-Starz deal isn’t supposed to end until 2012 but it looks like Netflix his the Sony-required subscriber limit and that’s what caused all this.

Sony: Will Work for Food

Sony has had a really rough year, or three if you’re keeping count. This year between the PSN hack ($170 million loss), the earthquake/tsunami, and some ‘tax asset write downs,’ they are going to be around $3 billion in the hole. This could be a driving force behind all of this as well. Perhaps they want to reel in all their big fish and only offer them through their own online streaming service. That could be bad for Starz as well as Netflix.

Starz would then probably have to renegotiate with Netflix on a smaller catalog after this which could be a net loss for them over all. Netflix could save the cash and try to get the rights to Sony content themselves, or they could simply dismiss it all and use that formerly earmarked money to go after all new, unique content which I still think they should be doing because this is going to be a continuing trend I think (this loss of licensed content).

Netflix Content is Diminishing Returns

Let’s face it, everyone is trying to setup their own streaming video service. They all saw how great Netflix did and now, instead of licensing out content, would rather try their own hand at it and keep more profit. That’s good and bad. It’s bad for consumers because now we’re going to need a dozen accounts to get our content, just what we all hated and why Netflix did so well…duh, the clueless film studios obviously don’t realize that was what made it so great.

How long do they think it will take for their own services to hit the 20 million mark? It’s like a built-in audience at Netflix, but they don’t seem to believe it’s financially prudent to continue with them. Crackle (Sony’s streaming service) and some others are clever, tie it to your Facebook account and you’re solid. Why it’s not tied to my Playstation Network account I don’t know, but that would certainly be cool.

Further fragmentation of the industry into all of these single-source streaming services is just going to mean consumers will eventually lose interest and make do with a limited subset of services. It’s certainly not going to help drive more sales of physical media or cable-based VOD which is just too expensive in comparison.

Follow the Dollars

I can’t see how they would make more money. After all, not only would they have to setup, test and then promote their own services, they’ll also have to maintain servers, staff, bandwidth and more. I would think that basically outsourcing all of that to Netflix would be a much more lucrative move in the long run. After all, they can build in re-assessment clauses and subscriber caps as well as perhaps a per-subscriber function into the contracts with them.

Alternatively, Netflix could offer them all a per-view contract. I imagine that might work in Netflix’s favor, because much of the content the studios are giving them isn’t all that new or all that popular. As far as I’m concerned, my Netflix queue consists of one or two TV series I needed to catch up on and an occasional film that I happen to not own.

Come to think of it, I don’t think I want to pay even every other month for Netflix now, but I’m certainly not going to head to Crackle, or will I? It is ad-supported and they say it’s all free. A quick peek at their TV lineup shows that it’s mostly anime and some bland old TV, nothing that would draw me there regularly.

Yeah, see I’m wishy-washy like that. I just want to get the content I want and not have to jump through 20 hoops to get it. Things were so much easier in the heyday of Blockbuster when they were pretty much the best show in town. Then again, we were all watching crappy VHS copies of stuff back then too.

That’s what made Netflix so great. Mail-order DVD rentals which then morphed into streaming for a great price. Sure, no one site is ever going to have all of the content any single consumer wants, but if one site has the majority of it, I imagine consumers would stick with them and then supplement with others on occasion. I know I will, just doing a quick search today shows me there’s probably enough content to keep me busy until this free month runs out on the 26th and might even be enough to keep me coming back for more.