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A Litmus Test for the Netflix-Starz Deal

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Liberty Starz Group (Nasdaq: LSTZA  ) is putting the thumbscrews on movie rental king Netflix (Nasdaq: NFLX  ) .

According to The Hollywood Reporter, Starz is about to impose a 90-day delay on original Starz shows before shipping the digital tapes off to Netflix for online streaming. The new policy starts with next month's premiere of Starz drama Camelot, which will run on the premium cable channel first and on Netflix three months later. In the meantime, legit Starz subscribers can watch the show on the Starz Online service, which requires an active Starz subscription.

The move doesn't affect previous seasons of Starz shows, and feature films won't be delayed -- at first. First-run movies will follow suit later.

CBS (NYSE: CBS  ) recently decided not to renew a contract that allowed streams of its current original series from its premium Showtime network, and Time Warner (NYSE: TWX  ) property HBO is engaging Netflix in a very public feud over the value of streaming services in general. In other words, this Starz restriction is nothing new, though it's troubling because it comes from a longtime partner that currently supplies most of the new-release streams that Netflix has on tap.

That existing agreement creates another angle from which to view the announcement: Starz could very well be using hard-nosed policies as a negotiating tactic. If this hurts Netflix, then the company would be more inclined to sit down at the negotiating table with more generous terms in mind -- just as long as Starz agrees to stop the torture.

Netflix spokesman Steve Swasey makes it sound like that strategy might fail, though. He tells the Reporter that Netflix subscribers don't care much for instant access to new releases, as long as the back catalog is complete. That theory is about to get put to the test as subscribers vote on the matter with their wallets.

Would a Netflix without original Starz shows still be the same customer magnet, or would it drop subscribers faster than a Sirius XM without Howard Stern? I don't watch Spartacus or Party Down myself, so I'm not in the best position to judge. Feel free to discuss the matter in the comments below, though.

Will Netflix survive in a hostile entertainment world? Add the stock to your Foolish watchlist, grab an oversized vat of popcorn, and settle in for an edge-of-your-seat marathon.

Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies discussed here. Netflix is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.

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  • Report this Comment On March 28, 2011, at 1:25 PM, DitchedADish wrote:

    A 90 day wait for new releases? Not a problem. STARZ ain't the only kid on the block at Netflix.

  • Report this Comment On April 07, 2011, at 5:33 AM, Sinitron wrote:

    I felt I was being spoiled before when I noticed the first season of Spartacus was streaming after just airing the original episode. I won't lie, I was excited to stream Camelot the say way, but waiting 90 days will be just fine. I won't feel spoiled now, but I don't think I'll feel shunned either. There's plenty of other content out there... plus Summer is coming up, don't usually ride the couch during summer time anyway. Thanks for forcing me outside Starz!

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