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Netflix (NFLX -7.6%) closed at levels last seen in early January after Viacom (VIA, VIAB) stated...

Netflix (NFLX -7.6%) closed at levels last seen in early January after Viacom (VIA, VIAB) stated on its FQ2 earnings call Epix's movies will be available on Netflix "under any circumstance," but other streaming partners might also be added. Last week, it was reported Apple (AAPL) is talking to Epix, which Viacom co-owns with LGF and MGM, about a streaming deal. Netflix's exclusivity ends in September.
Comments (8)
  • Epix's licensing deal with Netflix announced back in August 2010 was a 5 year deal estimated at "up to $1billion" whereby Netflix got Epix's films with 90 day delay and were "quasi-exclusive" until September 2012. I characterize the deal as "quasi exclusive" because obviously by definition, the recent output films are already appearing on the Epix pay cable channel and Epix HD (before being available on Netflix) which is Epix's authenticated streaming service (i.e. its version of HBO Go). For example, Paramount's Thor is on Epix now and will soon appear on Netflix after the 90 day preview. Based upon the various disclosures from Lionsgate and Netflix as well as Hollywood press, the deal was structured as a certain fee structure if it remained exclusive for the entire 5 year period but gave Epix an opt-out provision after 2 years to suspend exclusivity and license on non-exclusive basis, presumably at reduced contract rate. However, this concept of "exclusivity" is an oxymoron since it is only "exclusive" with respect to anyone else other than Epix who is already broadcasting and streaming the films.


    Hastings comment at Morgan Stanley conference was "we prefer to license on non-exclusive basis as that is less expensive but often our competitors only wish to purchase on exclusive basis so certain licensing rights are only offered for bid on an exclusive only basis." At a later event he elaborated further, "obviously as an insurgent, we prefer non-exclusive licensing arrangements, but as an incumbant, I suspect that we would then probably prefer exclusive arrangements."
    3 May 2012, 06:22 PM Reply Like
  • Epix, owning the option to opt out of the higher exclusive payments from netflix, will weigh the reduction in payments from netflix under current contract with what others are willing to pay for non-exclusive rights to same content.


    Netflix would obviously prefer Epix exercise the option and opt-out so it can reduce its content obligation costs.
    3 May 2012, 08:08 PM Reply Like
  • The silly thing is that it is already "non-exclusive" but we'll have another cycle of pundits proving their point about licensing competition. CEO of Lionsgate (one of 3 partners in Epix along with Viacom's Paramount) on Bloomberg interview had slightly different spin: "we are very happy with how our partnership with Netflix is working."


    In any case, the Epix content on Netflix isn't going to change in terms of showing on Netflix since the deal goes through 2015 (about the time all the major studios' output deals will have come up for renewal/rebid during 2014-2015 time frame, such as Disney, Sony Columbia, Universal, Fox, Warner-although WB likely locked at HBO) but the economics may change depending upon whether Epix thinks it can get more going non-exclusive versus what Netflix would pay in extending the faux exclusivity for the remaining period of the licensing term.


    I agree with you that I would prefer that Epix goes non-exclusive and have Netflix avoid paying for that faux exclusivity and instead devote those budget dollars elsewhere, including saving its resources to bid to win one of the other four of the Big 6 studio deals that are coming up in the 2014/2015 timeframe.
    4 May 2012, 01:03 PM Reply Like
  • Translation: Netflix is F*cked. They need to be acquired to stay alive. Reed alienated both content providers and customers. BUS 101 is don't do either. There's a reason he cashed out all his options last summer for $65M and has a handful of regular class a shares left.
    3 May 2012, 07:20 PM Reply Like
  • There are plenty of reasons to harp on Reed's missteps but cashing out all (or even most) his options isn't one of them because he didn't.
    4 May 2012, 08:21 PM Reply Like
  • Biobat,
    Do a little research ....he did. In addition, at the end of the year he did not own a single share of stock. That is pretty telling to me and any investor. His options were a strike price of 1.50 so he cashed those out at the height of Netflix knowing he bungled a dozen issues. As long as stock was above $1.50 he made off like a bandit. Then, he gets a 68% pay raise in 2011 while Netflix loses 77%. Base pay stayed the same but his options allowance went up $3M. Imagine if Netflix didnot collaspe. He'd make $100M easy.
    6 May 2012, 02:37 PM Reply Like
  • I have done the research. It's been repeated so many times by people thinking they have the story right and they don't. He cashed out his usual $1.50 options at a rate of 5000 shares per week since the company went public. He didn't, nor has he ever waited for the stock to pump up and then simply dump the stock on the open market. And yes, he's still got a vast majority of his $1.50 initial options (not to mention his yearly stock option awards) just waiting to be cashed.


    The former CFO however, did cash out most of his position.
    8 May 2012, 12:54 PM Reply Like
  • Read Hastings is an arrogant mega maniac who destroyed Whitney Tilson...Whitney would have become a billionaire with his short positions had he not been intimidated by Hastings. Tilson subsequently went losing millions!!!!!!!!!!!!!!!!
    3 May 2012, 09:23 PM Reply Like
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