During yesterday's quarterly earnings report, Netflix mentioned a possible end to its relationship with Epix -- one of its movie providers -- as if it were no big deal to lose a contract that provides many popular new release movies. "Epix is not a particularly large source of our viewing," CEO Reid Hastings wrote in an investors letter after revealing that the contract worth a rumored $1 billion will expire within the next year. Epix, a company owned by Paramount, MGM Studios, and Lions Gate Entertainment, when it signed on with Netflix gave the streamers access to new releases such as Iron Man 2 and Kick-Ass. The details with how many movies for how much weren't made public, but to give an idea of the kind of stuff it entails: it will also offer The Hunger Games in the Avengers in the beginning of 2013. Though the deal comes with a timing caveat -- Netflix gets the titles 90 days after they air on Epix -- without these offerings, supposed replacements for the Starz play content that went away last February, Netflix's movie offerings will be all the more depleted.
Though Hastings suggests Netflix viewers don't spend too much time watching Epix, most subscribers still use the service for movie watching. Television viewing is getting more popular, but still, the majority said that they watch movies either most often, or just as much as television. Since losing that Starz contract, Netflix has focused its efforts on getting television rights, which might explain Hasting's ambivalence toward the ending deal. Netflix has since added seasons of Mad Men, Breaking Bad, and Lost. It calls these series "26 hour movies," according to The New York Times's Brian Stelter.
But perhaps this isn't about what viewers want and what Netflix can afford. Television deals come cheaper than movies, as The Los Angeles Times's Ben Fritz and Joe Flint explained last February. Reruns are less valuable to television networks because watching a one-off episode of Lost doesn't appeal in the same way as having access to an entire season. That Epix deal cost a supposed $1 billion; Netflix paid $1 million for each episode of Mad Men, one of the more valuable shows. Once Epix expires, so will the movies. But it will also have $1 billion to put into the next season of Mad Men, or even original, more valuable propositions, like television programming such as the upcoming Arrested Development series.
Update 2:35 p.m.: Epix doesn't think its relationship to Netflix is so worthless. "EPIX content is an important driver in Netflix value – in fact, EPIX movies are a critical part of Netflix promotion and marketing efforts, representing the entirety of their recent movie offering including the year’s biggest blockbusters (The Hunger Games and Avengers)," an Epix spokesperson told The Atlantic Wire. With that attitude, it doesn't sound like Epix will give up on future negotiations with the company so easily. It told us it has the option to extend its contract to 2015.