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Netflix scrambles future of TV, films

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CIOL Bureau
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NEW YORK: Hollywood, which embraced Netflix Inc just a few years ago as a savior, is moving quickly to stanch the growth of one of the media's newest, biggest stars.

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Senior executives at three of the big six television and movie studios said they were seeking ways to contain Netflix - from delaying when Netflix can make new DVDs available to rent to raising the prices for digital programs.

"The problem is that Netflix is not the company we thought it was when we started doing these deals a few years ago. It has changed," said a studio executive who requested anonymity because the studio's discussions were confidential.

Netflix, whose stock has jumped nine-fold over the past two years, is a leader in U.S. DVD rentals with its service that sends movies and TV shows through the mail. Its streaming service is also growing quickly, and accounts for one-fifth of U.S. Web traffic in peak hours.

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Studio executives have expressed disbelief over some of Netflix's Hollywood content coups, like its 2008 deal with Liberty Media Corp-owned Starz to offer films from Sony Corp and Walt Disney Co for $20 million to $30 million. That deal put Netflix's streaming service on the map for a fraction of what cable operators had paid Starz.

Not a viable window

Media executives also worry Netflix could bring on a re-run of what happened in the music business when Apple Inc, maker of the iPod, wound up dictating prices.

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"Timing really matters," said Strauss Zelnick, chairman Take-Two Interactive at the Reuters Media Summit. Zelnick said studios, to protect profits, must be careful to maintain control over when movies and TV shows are released on DVD or to cable. This is commonly referred to as windowing.

Netflix, with deep pockets and a willingness to pay heavily for content, is succeeding where Google Inc, Apple and studios have so far failed - developing a viable business for digital movies and films.

Scenarios under review, according to executives, include curtailing Netflix's influence by delaying further the 28 days Netflix now waits to get newly released DVDs from some studios. Another is raising prices Netflix pays for digital rights.

Time Warner Inc Chief Executive Officer Jeffery Bewkes recently said extending the delay to Netflix was under consideration. "The question of whether we ought to go longer is very much under scrutiny. It may well be a good idea," he said on a recent call with analysts.

Pay TV operators, which spend heavily on studio fees, are also pressuring studios that offer cut rates for distribution on Netflix.

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