continued Netflix appears to be a victim of its own success. Or lack of foresight. Or both. Read on and take your pick.
Starz, which controls pay-cable rights to Disney and Sony movies, signed its current agreement with Netflix in 2008. At that time, video streamed online was watched by only a small number of the tech-savvy. The estimated $30 million per year Starz received from Netflix was seen as gravy that would have little impact on its traditional pay-cable service.
That was then. Now Netflix has 25 million subscribers — an exponential growth fueled in significant part by Starz premium films. But unfortunately for Netflix, its contract with Starz has a clause that caps the number of Netflix subscribers who can watch Sony movies online — a number Starz calculated as the point at which the value of its more profitable pay-cable service would be degraded by losing exclusivity. A number calculated at less than 25 million. Arrivederci Starz.
The corporate world. You gotta love it. Essentially, Netflix signed a contract with Starz that ensured its reward for doing better would be to do worse.
Finally, Netflix made yet another change. The company announced it would split Netflix into two separate businesses, one for internet streaming and one for DVDs by mail, rename the latter “Qwikster,” and force customers subscribing to both to pay for and manage two separate accounts.
One customer aptly complained that this change makes Netflix “exactly the opposite” of what it used to be: “seamless and easy to understand.”
So let me see if I have this straight. More or less simultaneously, Netflix’s entertainment value degraded, its convenience diminished, and its cost increased. Less for more. Good luck with that business plan. New Coke, move over.
Barry Schreibman is a veteran attorney and long-time Cazenovia resident. His legal practice includes general civil litigation and criminal defense work, as well as land-use permitting issues. He can be reached at 655-5561 or email@example.com.