Current pact expires on February 28, 2012, stripping the popular subscription service of titles from Disney and Sony
Starz will not renew its streaming deal with Netflix, the pay cable company announced on Thursday.
Starz Chief Executive Officer Chris Albrecht said that the company wanted to protect the "premium nature of our brand."
Netflix issued a gracious statement about the contract breakdown, calling Starz a great content partner.
"While we regret their decision to let our agreement lapse next February, we are grateful for the early notice of their decision, which will give us time to license other content before Starz expires."
Although Netflix has been busy inking deals with content makers such as AMC and Epix over the past year, the move leaves the subscription service without one of its best sources of online programming.
It also strips Netflix's streaming service of some of its newer releases from studios such as Disney and Sony.
Without Starz's streaming content, analysts say that Epix will provide the bulk of Netflix's top shelf film titles, making the company more reliant on television offerings such as "Mad Men" and "Glee."
"Starz is what made Netflix's streaming initially — this could be its downfall," Tony Wible, an analyst at Janney Montgomery Scott, told TheWrap.
Wible said that a lack of premium content could cost the company subscribers, which could further limit its financial wherewithal to compete for increasingly pricey streaming rights to movies and shows.
Netflix shares fell 9 percent in after-hours trading on the news that Starz was walking away.
The announcement comes on the same day that Netflix instituted a 60 percent price hike to its most popular subscription plan — a move that inspired widespread outrage among customers when it was announced last July.
Starz signed its deal with Netflix in 2008 before a price point had been set for streaming content. To the end, its $30 million a year deal falls far short of the $1 billion over five years pact Netflix inked with Epix last year.
The current pact with Starz is set to expire on February 28, 2012.
There have been signs that negotiations between the companies had started to fray even before Thursday's announcement. In March, for example, Starz instituted a 90-day delay on when Netflix could stream its original programs.
At the time, Netflix said it still anticipated a new deal could be reached.
"It turns out Starz competes directly with Netflix. People were canceling Starz and just getting Netflix," Edward Jay Epstein, the author of "The Hollywood Economist," told TheWrap. "It wasn't in Starz's interest to keep the thing going. It was in no one's interest, but Netflix's."
It's possible that Starz is only using the announcement as a negotiating ploy, but should it decide to turn its back for good, it will find many more online options for its content than it had when it first signed with Netflix.
"With our current studio rights and growing original programming presence, the network is in an excellent position to evaluate new opportunities and expand its overall business," Albrecht said in a statement.
Deep-pocketed Amazon, for one, has been investing heavily in streaming content over the past year, signing deals with the likes of CBS and apparently paying top dollar for content.
That means Amazon chief Jeff Bezos might want to break out the checkbook.