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By Relmor Demitrius

Is Netflix (NASDAQ:NFLX) now officially “dying”? The first mortal wound on a paper tiger may have been struck. And look at who is in the center of it all. John Malone, Founder of Liberty Media (LINTA). Since 40% of Sirius XM (NASDAQ:SIRI) is owned by Liberty Capital (LCAPA), Sirius XM investors always try to listen to what Liberty Media is saying about their company and Liberty’s future plans. Well one of those plans became painfully obvious to those here at KOAT, even before Malone offered a bare bones explanation. Starz Media (LSTZA) has declined to be part of Netflix going forward, as of right now, in any form. Money was no option. Netflix offered 10 TIMES the old contract price and still Starz said no thank you. You’re no longer going to compete with our services by allowing us to give you our exclusive content at wholesale rates. Your nothing but a monster that was created by one instant in times collective greed by content providers. Did they envision what Netflix would become? I seriously doubt it, or these media companies never would have signed the original agreements. No existing content provider creates a Netflix on purpose. They would have said, why didn’t we just do that? Dahh!! Ya, exactly idiots, why didn’t you? Well someone has finally taken a stand and said no more. You offer NOTHING we can’t offer people at some point in the future. Hence bye bye.

$300 million dollars a year wasn’t enough to convince Starz to come aboard. They were paying 30 million a year. Malone had this to say about the situation with Netflix.

“The way this cuts varies depending on whether you’re a premium service as Starz, where ultimately the whole concept of sequential distribution of movie product or of originals has to go through various organisms in order to optimize valuation. Taking it all and dumping it in at wholesale on a random access basis really undermines long term perceived value. That’s the biggest problem conceptually that we have with the Netflix approach toward distribution as a content investor or owner.”

Basically were game to give you our content, but not anywhere near the old deals structure. If at all. I still doubt they ever reach an agreement. If 300 million dollars doesn’t convince them, not sure what would. We will follow this story closely from this point forward. This is big news in the content distribution space and the future of what Dish/DirecTV may look like down the road. Why not create their own Netflix? What does Netflix offer than anyone else can’t? Exactly. Call a few movie studios, get them better rates, and there you go, you have a competing service with few capital requirements to start up. You ALREADY OWN ALL (25.21 ↓-2.48%) THE CONTENT!! Cable companies and satellite radio companies hate Netflix with a passion. Every $1 spent on Netflix is $1 they can’t access directly to their revenue streams. Eliminate the middle man and media companies should start their own service.

Malone also comments that Liberty Media has almost 10 billion in cash ready to invest. That could be something that Sirius XM stockholders might find interesting, as Liberty already owns 40% of their company for free. Malone stole 40% of the company from stockholders without a legal vote in February of 2009. He is currently being sued for this as a person on the board and I’m hoping that lawsuit is won by the owners of Sirius XM. It would remove any financial compensation Malone received by Sirius XM. Nothing else that shattering, but I like the message it sends. The DOJ has fined Malone at least on one occasion, once for violating pre-merger requirements in its Discover dealings. So Malone is a guy who doesn’t care about the law to get what he wants. These are the sharks that Netflix is now dealing with. Malone is now showing Netflix some teeth. I fully expect more and more content providers to seek alternative revenue streams outside of Netflix to promote their content and access more money directly. This is just the first of many companies that will more than likely flee Netflix.

When Liberty spends that 10 billion dollars we will know pretty much what their intentions for the future are, in media and with Sirius XM. With Mel Karmazin (CEO of Sirius XM) beginning a stock buyback program in 2012, Liberty’s time to take a piss or get off the pot is here finally, in regards to their future plans with the company.

As Malone stated, now that the Liberty spin off of Starz and LCAPA are complete, the company can now move forward and begin exercising some long term plans. Final approval on that is approaching in mid September.

Disclosure: Long SIRI

Source: Liberty Starz Battle With Netflix Could Have Larger Ramifications To The Future Of Media