UPDATE, 5:20 PM: Netflix shares tumbled in after-hours trading after Starz announced it had ended contract renewal discussions. The stock was quoted at $213.03, down 8.7%, on volume of around 520,000, according to Nasdaq.com. Netflix spokesman Steve Swasey said in an email that the company was “confident we can take the money we had earmarked for Starz renewal next year and spend it with other content providers to maintain or even improve the Netflix experience.” Starz movies and shows account for just 8% of U.S. subscribers’ viewing, Netflix said, and the company had projected that to fall to 5%-6% percent by the first quarter of 2012, when the deal dies.

ENGLEWOOD, Colo., Sept. 1, 2011 /PRNewswire/ — Starz, LLC, President and Chief Executive Officer, Chris Albrecht, issued the following statement today regarding the status of affiliation agreement renewal discussions with Netflix.

“Starz Entertainment has ended contract renewal negotiations with Netflix. When the agreement expires on February 28, 2012, Starz will cease to distribute its content on the Netflix streaming platform. This decision is a result of our strategy to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content. 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.”

Starz operates 17 premium cable channels, including the flagship Starz and Encore brands, and is controlled by John Malone’s Liberty Media. Starz Entertainment airs more than 1,000 movies and original series every month across its pay TV channels. The way the deal with Netflix worked, Netflix gained online access to newer films from Sony Pictures and Walt Disney through the streaming agreement with Starz. But that pact ends February 28, 2012. Access to Sony movies was already halted. Netflix CEO Reed Hastings said in June it “wouldn’t be shocking” to pay $300 million a year, or 10x more, to renew the Starz rights.

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