Starz network extends pay-TV deal for Sony movies
(Reuters) - Sony Pictures Entertainment and U.S. pay-TV network Starz extended an agreement that gives Starz exclusive rights to Sony movies through 2021, blocking Netflix Inc from striking a deal with the Hollywood studio.
Netflix signed a landmark agreement in December to stream first-run Walt Disney Co movies, and CEO Reed Hastings told analysts in January that his video subscription service was interested in securing the rights to Sony movies as well.
Starz shares climbed 7.3 percent to $17.89 in afternoon trading on the Nasdaq. Netflix shares fell 2 percent to $177.23, also on Nasdaq. Shares of Sony Corp, the Japanese parent of the Sony movie studio, rose 0.3 percent to $14.96 on the New York Stock Exchange.
Financial terms of the agreement were not disclosed.
Starz CEO Chris Albrecht said he believed the terms were "consistent with other recent agreements between traditional premium TV networks and major Hollywood studios."
Morgan Stanley analyst Benjamin Swinburne estimated Starz currently pays about $200 million annually for 35-50 films per year. "Our assumption that Starz will have to pay 5 percent higher per film rates on Sony films beginning with 2017 releases may be conservative," said Swinburne, who rates Starz "equal weight."
Stifel Nicholas analysts said the Starz/Sony agreement was "likely priced in the $300 million per year range, similar to what the Disney deal with Netflix was recently priced at."
"While we would expect investor relief today, we continue to remain 'sell' rated as we see continued margin erosion at Starz," they said.
Sony Pictures' films such as "The Amazing Spider-Man", "21 Jump Street", "Zero Dark Thirty", "Men In Black 3" and "Resident Evil: Retribution" will be shown on Starz channels in 2013.
Starz provided Netflix with both Disney and Sony movies until early 2012, when the two companies ended their partnership after they failed to negotiate a pricing system that required Netflix customers to pay more for some Starz content.
Starz, spun off from John Malone's Liberty Media last month, runs eponymous movie and TV channels, as well as the Encore movie channel. It competes with Time Warner Inc's HBO and CBS Corp's Showtime.
The previous agreement between Sony Pictures, a unit of Sony Corp, and Starz covered film releases through 2016, the companies said in a statement.
Netflix has been trying to beef up original content and hopes its new Kevin Spacey series "House of Cards," will be the first step in its plan to shake up the television landscape. [ID:nL1N0AX05Q] The company reported a surprisingly strong holiday quarter in January, easing near-term concerns about its costly expansion plans and its movie and TV bill. [ID:nL1N0ATA0E]
(Reporting by Lisa Richwine in Los Angeles and Sayantani Ghosh in Bangalore; Editing by Maju Samuel, Sriraj Kalluvila and Andrew Hay)