Starz talks with Netflix weekly, no rush for new deal

NEW YORK (Reuters) - Liberty Media Corp's Hollywood unit is talking weekly with Netflix Inc, but its chief executive said it is in no rush to cut a new online streaming deal with the movie rental company.

Liberty Media's Greg Maffei said the current deal his company's Liberty Starz unit has with Netflix still has plenty of time to run and there are no current talks to seek better terms. The original deal was cut around four years ago when online video streaming was just starting out.

"There's no need to re-cut the deal, and there's plenty of time to extend and create a new deal or not," said Maffei, speaking at Citi investor conference.

Starz has the pay-TV and online distribution rights to two of Hollywood's biggest studios, Walt Disney Co and Sony Corp's Sony Pictures.

The original online streaming rights are believed to have been agreed for around $30 million a year four years ago, according to people familiar with the deal who said it will expire this year. Many Wall Street analysts now expect a new deal for around 10 times the cost of the original.

Netflix is now the third-largest U.S. video company, with more than 16 million subscribers and nearly two-thirds of them have streamed content, according to the company.

A deal between Netflix and Starz's pay-TV channel will be one of the most closely watched transactions in the pay-TV business in 2011. Traditional distributors like cable and satellite TV companies fear Starz could cut a new deal that makes Netflix an even more attractive prospect for customers. Some on Wall Street worry customers are already fleeing cable for the cheaper, more streamlined over-the-top services like Netflix.

Maffei said his company was unlikely to undermine its healthy relationship with the traditional cable business, which generates the majority of its $1.2 billion in annual revenue. But he also said his company had to ensure it was in conversation with a range of new big name players that are thinking about launching new video distribution service such as Google Inc, Apple Inc, Microsoft Corp and Amazon.com.

"We're not living in a very certain time for this time for this (pay-TV) space," said Maffei.

Speculation has begun to mount that Netflix might even offer to buy Liberty Starz for around $3 billion as a way to ensure it wins the distribution rights for major movies and remains competitive.

At $3 billion transaction would translate to around $75 a share, compared with Liberty Starz's closing price on Wednesday of $69.56. Collins Stewart analyst Thomas Eagan estimated a more likely minimum price would be around $85 per share or around $3.5 billion.

"At this price however Liberty Starz might become difficult to digest as it would exceed a third of Netflix's enterprise value," Eagan said in a client note. He also said it was unlikely that Liberty Media Chairman and cable TV pioneer John Malone would be interested in selling as wants to remain a force in the pay-TV business.

(Editing by Steve Orlofsky)