Chief Content Officer at the streaming media juggernaut known as Netflix (NFLX – Analyst Report), Ted Sarandos, wrote in a blog post yesterday that the company will not be renewing its distribution deal with Studio 3 Partners’, a Viacom (VIAB – Analyst Report) subsidiary, cable network Epix. This means Netflix’s US subscribers will only have one more month to watch Hunger Games: Catching Fire, World War Z, Transformers: Age of Extinction, Star Trek: Into Darkness, and many more blockbuster films.
On the surface, the loss of major Hollywood films from any media library is something no company like Netflix prefers. Some of the movies leaving at the end of September did extremely well at the box office. Furthermore, the company ended the day 2.24% down and is currently trading a little more than 1% down after closing, which may be related to the news yesterday.
However, the state of Netlfix is not one of anarchy like the worlds in Hunger Games: Catching Fire, World War Z, or Transformers: Age of Extinction in light of this breakup. Let’s examine 3 critical factors to why Netflix will be just fine losing their contract with Epix.
1.) The Contract Was Not Exclusive
From Variety.com, to Fourtune.com, to Recode.net, all articles have stated that the Netflix-Epix deal, signed in 2010, was not one of exclusivity. In 2012, Amazon (AMZN – Analyst Report) and Epix signed a deal for Amazon Instant Video to stream movies from the Epix library. Having exclusive rights to a media library is critical in the streaming video marketplace. Nonetheless, this overlap in content has been going on for roughly 3 years now and has not negatively affected the profits of either Netflix or Amazon.
If this was still an exclusive deal between the two parties, as well as occurred during the time when Netflix lost its deal with Starz in 2011, the sentiment of this entire article would probably be different. However, that prior scenario is not the reality and Netflix has grown immensely since 2011, primarily due to the trend in cord cutting by many Americans.
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