There's a fine line between genius and madness. Netflix
The big Lebowski
CEO Reed Hastings has been pretty cavalier about the Starz deal. Last December, he told a conference crowd that "It isn't essential to our success." Waxing nonchalant, he continued: "The Starz deal turned out to be a great deal for us. We'll try to renew it. But there's no one piece of content that's central for us." In short, "we can live without it."
That idea is being put to the test today as Liberty Starz
Liberty is no stranger to new-age distribution methods. For example, corporate sibling Liberty Capital
The perfect storm
Starz CEO Chris Albrecht positions the move as a strategic choice: "This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content."
Speaking to BusinessInsider, Hastings still seems sanguine about it: "We are confident we can take the money we had earmarked for Starz renewal next year and spend it with other content providers to maintain, or even improve, the Netflix experience."
That remark dovetails right into the other litmus test of the Netflix model that's going on right now, wherein Hastings predicts manageable defections from the recent price changes. That new plan went into effect yesterday. In about a month and a half, Netflix's next earnings report will tell us exactly what happened.
It almost looks like gamesmanship when Starz pre-announces the end of its movie distribution deal right on the start date of the new prices. Did Redbox runner CoinStar
According to Hastings, this is a storm in a teacup as Starz streams only make up about 8% of instant viewing today and should "naturally drift down to 5-6% of domestic viewing" in the next quarter as Netflix adds more content from other sources.
Some investors obviously see a huge "SELL!" sign flashing above the Starz announcement. Me, I see the best buy-in point Netflix has offered since mid-March. Your view will depend on whether you see Hastings as a shrewd mastermind or a desperate spinmeister.
Remember when Blockbuster, Wal-Mart
And now, history is repeating itself. What have you learned?
Keep a close eye on digital entertainment:Fool contributor Anders Bylund owns shares of Netflix but holds no other position in any of the companies discussed here. The Motley Fool owns shares of Wal-Mart Stores. Motley Fool newsletter services have recommended buying shares of Wal-Mart Stores, Coinstar, and Netflix; buying puts in Netflix; and creating a diagonal call position in Wal-Mart Stores. 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, follow him on Twitter or Google , or peruse our Foolish disclosure policy.