At a time when many in Hollywood see Netflix as a threat, Showtime Networks said it will significantly alter the licensing agreement it has for Netflix's streaming-video service.
This summer, when the current deal between Showtime and Netflix expires, Netflix's new streaming agreement doesn't include any rights to any of the first-run series that currently appear on the premium-cable service. Under the new deal, Netflix subscribers will lose access to such shows as "Californication and "Dexter." (Showtime is owned by CBS, parent company of CNET.)
While past seasons of "Dexter" will be pulled, Netflix will continue to stream episodes of "The Tudors," and get access to "Sleeper Cell" as both series aren't coming back to the cable service, Showtime said.
CBS cut a similar streaming deal with Netflix, offering only dated catalog titles such as "Family Ties" and "Star Trek" but no current shows.
Showtime's comments appear to have caught Netflix off guard. Steve Swasey, Netflix's spokesman, disputed that it was final "Dexter" and "Californication" would not be coming back. He said Netflix and Showtime are still in negotiations.
"We have one deal that brought in 'Sleeper Cell' and 'The Tudors' and a separate deal for 'Californication' and 'Dexter,'" Swasey said. "Negotiations [for the latter shows] are still ongoing. We expect to renew our deal for 'Dexter' and 'Californication' so we're perplexed [about Showtime's comments]...we have great relationships with CBS and all their channels, including Showtime."
For months, media moguls and studio executives have tried to tag Netflix as the next Boston Strangler to the film and TV businesses. Jack Valenti, the former chief of the Motion Picture Association of America once said the VCR would be to the film business what the famous serial killer was to women.
Things weren't quite so dire two weeks ago when I met with studio contacts in Los Angeles. I was told that they would continue to supply Netflix with content but not their most valuable. In some cases not even second-tier fare.
They told me they simply can't afford to allow a discounter like Netflix to offer TV shows and films until the content had gone through the traditional distribution chain and most of the value was squeezed out. In other words, they want cable, pay TV services and regional TV broadcasters to get a crack at the shows and films first.
One studio source who wasn't as down on Netflix predicted that the pressure on the company might ease as soon as the big studios and TV networks learned how to correctly price content for digital distribution. The source said the backlash in Hollywood against Netflix is only a knee-jerk response to a service that grew 60 percent last year and now boasts 20 million subscribers. But even that source said there's no way the studios are going to hand over new releases and hit films to Netflix--not until they are back catalog.
The service grew fast and that worried the studios. Decision makers film and TV don't want people getting used to watching sought-after shows on an all-you-can-east basis for just $8 a month--less than the price of a single DVD.
Meanwhile, Netflix has upped the ante by acquiring the rights to original content. Last week, the Los Gatos, Calif.-based company cut a deal to obtain "House of Cards," a new series from actor Kevin Spacey and director David Fincher. The agreement was a departure from Netflix's typical licensing deals. Netflix usually obtains content after it has already appeared on TV or in the theater.
The cost for the series is said to be between $50 million $100 million and that's likely too expensive for Netflix to acquire too many shows of the same caliber.
Update:8:50 p.m. PT To include statements from Netflix disputing that any deal for "Californication" and "Dexter" was final.