The US pay-TV and streaming provider Starz is terminating parts of its output deal with Universal ahead of schedule. The company is paying US$147.2 million to opt out of certain future film commitments. This move highlights just how much the economic valuation of film rights is changing in the streaming and pay-TV sectors.

This affects certain live-action films covered by a so-called ‘Post-Pay-1’ output deal. Such agreements grant a broadcaster or streaming provider access to a studio’s extensive film catalogue over an extended period. For the studios, output deals offer a predictable distribution and revenue structure, whilst the buyers secure the rights to a continuous supply of content in the long term.

In the case of Starz, part of this agreement apparently proved to be of little commercial value. The films in question had reportedly generated only low viewing figures and little audience interaction. Starz therefore decided to terminate the relevant obligations early and to make the agreed payment of 147.2 million dollars.

This move is particularly significant in the context of the changing streaming economy. Providers now have extensive in-house catalogues and, using usage data, can assess much more accurately which content actually reaches viewers and contributes to customer retention. Long-term agreements covering large film packages can therefore become a financial risk if a significant proportion of the licensed titles fail to achieve the expected viewing figures.

For rights management, this means a greater focus on individual titles and their actual commercial potential. In addition to the size of a film package, factors such as genre, target audience, distribution window, territory and expected demand are playing an increasingly important role. For studios and producers, this may also mean that negotiations with platforms become more selective and that the long-term predictability of output deals decreases.

The Starz case thus serves as a prime example of how the relationship between studios and platforms is continuing to evolve. Extensive content packages with long-term guarantees could increasingly be replaced by a more targeted selection of films, the value of which is assessed on the basis of specific demand and usage data.