Loss of Starz deal may not hurt Netflix: analysts

Reuters News
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Posted: Sep 02, 2011 8:39 AM
Loss of Starz deal may not hurt Netflix: analysts

(Reuters) - Shares of Netflix Inc fell more than 10 percent in pre-market trading on Friday, a day after Pay-TV operator Starz Entertainment decided not to renew its contract with the movie-rental company.

However, some analysts were unfazed by the move and were positive on the company's prospects to secure alternative deals.

Starz, controlled by John Malone's Liberty Media, ended talks to renew a deal that expires February 28. After that date, Starz will stop providing its content, which includes exclusive rights to first-run Sony Corp and Walt Disney Co movies, for streaming on Netflix.

Jefferies analyst Youssef Squali said while Starz will continue to hold the rights to Sony and Disney titles, Netflix could independently strike a deal with the production studios for streaming content.

"We believe Netflix has seen little overall pushback from subscribers since Sony content was pulled from the service more than 2 months ago in the related, but separate dispute between Sony and Starz," Squali, who kept his rating and price target on the company's stock, said.

Piper Jaffrey analyst Michael Olson said although the Starz provides a "larger" portion of new releases on the Netflix service, its share of overall streaming content has declined in the last two years.

"Since signing the Starz deal in 2008, Netflix has added TV content from many suppliers and movie content from EPIX, Relativity Media, Millennium, Miramax and others."

"We believe Netflix will now look to increasingly acquire movie rights directly from studios, in competition with pay-TV offerings," Olson said.

Netflix shares fell 10 percent to $209.63 before the bell. They closed at $233.27 on Thursday on Nasdaq. (Reporting by Himank Sharma in Bangalore; Editing by Gopakumar Warrier)