Who gets Starz digital rights now? Probably no one

Starz dropped a bomb on Netflix, announcing to the world that it was ending negotiations for a renewal of their deal and pulling its content from the streaming service next March. That’s led many to speculate about who might pick up those rights when they lapse. The most likely outcome isn't that Starz’s streaming content goes to one of Netflix’s competitors, but that the network keeps the digital rights to itself and makes them part of its TV Everywhere services with cable companies, who can offer the programming online for their paying customers.

Starz already gets a substantial amount of money from its cable partners, and it hopes to get more by rolling out TV Everywhere-type services. The problem is that its cable partners won’t want to pay more to compete with Netflix, which would offer the same content on the same devices at a heavily discounted rate. Starz currently makes about $7 per subscriber from its existing partners. But a Netflix renewal, even one valued at $300 million a year, would pay substantially less than that: With about 22 million streaming subscribers forecast for the third quarter, that comes out to just a little more than $1 per user, and Netflix’s subscriber base continues to grow. Since Netflix charges $7.99 per subscriber, it simply can’t compete with the amount that Starz makes from the cable guys. And if the financials don’t work for Netflix — which has been leading the way in terms of writing big checks — they seem even less favorable for everyone else.