Parks Associates Blog

Wednesday, October 01, 2008

Time for Starz and Netflix to shine

Digitization of media is rapidly changing the interaction between media companies and consumers. As recently as 2006, ABC was accused of being a heretic when it started to release full episodes of its primetime TV shows online for free. Today, the practice is ALMOST mainstream.

Media companies realize (some just a little bit faster than others) that digitization and prevalence of inexpensive broadband (at least in the US, and I do use term "inexpensive" loosely) has given consumers options. Media companies have also realized that consumers with options can’t be easily herded to a specific time (such as primetime) or medium (such as a TV channel or a destination site). Today, consumers no longer have to chase the media. It is the media that has to chase the consumers and present itself to them wherever, whenever and however CONSUMERS want it.

The latest testament to this trend is the deal that Starz announced with Netflix. Starz would make its Starz Play service available as part of the Netflix’ “Watch Instantly” feature. This deal makes the service available to Netflix’ 8.4 million users (as of Q2 2008). It is a bold move for Starz and jives well its overall goal: to make its content available to any consumer on any device. By comparison, the other major premium content player – HBO – has been dragging its feet. Its HBO on Demand service is only available to current HBO TV subscribers, only available in one market (in Wisconsin) and is only available on PC.

It is understandable that HBO is trying to protect its valuable user base, but in terms of next generation of distribution strategy, Starz is designing a new concept car while HBO is pimping its horse and buggy.

The move is also a shot-in-the-arm for Netflix. Securing rights to digital distribution of premium content is a single biggest roadblock to Netflix’ success. With the Starz deal in place, Netflix can now add 1,000 more titles to its 12,000-title “Watch Now” library with another 1,500 titles that would be added by the end of the year. Netflix also bundles Starz content into its all-inclusive, $8.99-per-month service tier**, creating potential to upsell existing customers and augmenting allure for new ones.

**STARZ-only service tier is also available through Netflix for $7.99/month

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