Netflix bought Disney and Sony streaming rights from Starz instead of from the studios

In a July 2020 Vox article, Peter Kafka and Rani Molla say Netflix broke into streaming in a big way in 2008, through a backdoor. It purchased digital streaming rights to movies from Disney and Sony, such as Pirates of the Caribbean, from Starz, the pay TV channel. Starz had ambitions for its own streaming service, but those fizzled, which is why most people have never heard of Vongo.

A contractual loophole let Netflix get Disney's and Sony's content without cutting deals with the studios. Netflix paid around $30 million a year and became a pretty good streaming service almost overnight. In 2012, when it wanted a new streaming deal for content from Disney, which by then had realized that streaming was real, Netflix paid an estimated $300 million a year.

Soon media companies were scrambling to sell directly to Netflix as an easy source of nearly free money for old shows and movies they were selling elsewhere. The article argues that Netflix took what Hollywood treated as leftovers, built a giant business with it, and ended up competing with those players using their own content.

Starz held the rights and no longer needed them once its own service fizzled.

Buying from Starz meant Disney and Sony were not in the negotiation.

Studios treated old content as leftovers and valued streaming deals low.

Once studios saw streaming as real, the same content cost about ten times as much.

Rights sit in layers; the cheapest moment to buy a new medium is from an intermediary who has not priced it.

By 2012 Disney had realized streaming was real and Netflix paid an estimated $300 million a year for its content. The article's conclusion is that big media companies are years behind what used to be a Silicon Valley upstart.