Sony Pictures Entertainment (SNE) and Starz (STRZA) announced the extension of a deal that gives the pay-TV company exclusive rights to show Sony films through 2021. The development comes as somewhat of a turnaround for Starz, who late last year lost out to Netflix (NFLX) on a similar agreement they had previously held with Disney (DIS). The news sent Starz’s share price up 7.44 percent to $17.91, while Netflix finished the day taking a hit of 1.70 percent to drop to $177.89.
The deal was basically a do-or-die situation for Starz, who, while not in direct competition with Netflix, would have been cut out from carrying Sony blockbusters by any exclusive deal it may have made with the streaming content provider. A Netflix-Sony deal would have meant the possibility of further damaging Starz in terms of original programming as well, as Netflix has already debuted their first series with “House of Cards” (starring Kevin Spacey), and is planning for the release of an upcoming brand new season of the wildly popular (and until now long inexplicably discontinued) “Arrested Development” series. This is especially the case as Netflix is already looking to change the way viewers absorb programming, as they released all the episodes of the first season of “House of Cards” at once, instead of making viewers wait a week between episodes. Though this has less (if anything) to do with Starz than with other perceived competitors such as HBO (TWX) and Showtime (CBS), who more or less pioneered the format, it is not hard to imagine that Starz could sustain even more collateral damage, especially if left without the padding provided by an exclusive deal with Sony.
The announcement comes at a time when Netflix seems to be back on the rise after some recent setbacks. Until last year, they were paying Starz for the ability to stream both Disney and Sony films, but the arrangement went sour after Starz insisted that customers be charged a higher price for this particular content. Netflix then penned a deal with Disney directly, and was thought to be on the hunt for other film studios and content providers.
While Starz may have won this battle, significant though it may be in the short term, it is yet to be disclosed how much the Sony contract is going to cost them (some estimates put it near or even above the $350 million that Netflix is paying Disney) and whether or not they will have to pass this cost down to customers.
As of today’s close, Netflix’s year-to-date performance is up 92.13 percent, compared to Starz at 34.86 percent even with today’s bump. For its part, Sony’s stock ended the day up 0.47 percent, or $0.07 cents at $14.99.