Michael C. Hall stars as serial killer Dexter Morgan in the Showtime series… (Randy Tepper, Showtime )
Netflix Inc. is increasingly feeling the sharp elbows of Hollywood.
Already frozen out by HBO, the nation's largest premium cable channel, Netflix discovered this week that it soon would lose content from another premium service that until now had been an ally.
Showtime Networks said Tuesday that when its existing agreement with Netflix expires this summer, it would no longer make episodes of its first-run series, including "Dexter" and "Californication," available to Netflix's online streaming service. Instead, the cable channel — a unit of CBS Corp. — plans to use some of its most popular programs as bait to sign up and retain subscribers.
The move comes one week after Netflix announced that it was acquiring rights to its first original series, the Kevin Spacey political drama "House of Cards," putting it in direct competition with cash-cow premium cable channels.
"The media companies are increasingly concerned about whether it is appropriate to take money from Netflix," BTIG Research media analyst Richard Greenfield said Wednesday. "Is it incremental revenue or cannibalistic to their existing businesses? I don't think any of us know the answer."
Older Showtime programs that have ended their network run, including "The Tudors," will continue to be offered on Netflix's streaming service, Showtime said. When the new agreement between the two companies takes effect this summer, episodes of "Dexter" and "Californication" will disappear from Netflix's streaming service and will be offered exclusively on Showtime's online service, "Showtime Anytime."
When TV networks and studios first made deals with Netflix a few years ago, the Los Gatos, Calif., company was considered an innocuous movie rental service much like the corner Blockbuster store. But now that Blockbuster Inc. has filed for bankruptcy protection and Netflix has more than 20 million customers and an increasingly popular Internet streaming service, the TV industry is viewing Netflix as a threat.
"With the purchase of more original content, Netflix could become more like the premium cable TV channels," Goldman Sachs entertainment analyst Ingrid Chung said Wednesday in a research report.
Netflix downplayed the development. "Netflix may or not renew with Showtime," the company said in a statement. "Titles expire and migrate on and off Netflix [as] part of the ebb and flow of licensing."
The loss of Showtime originals should not have much of an effect on Netflix, Chung said.
But she noted that the move "does demonstrate that it could become incrementally more difficult for Netflix to attain streaming access to original TV series on other premium cable channels, such as HBO."
Time Warner Inc.'s HBO has been particularly uncooperative, holding back all of its new TV shows and movies from Netflix's streaming service. The Starz and Epix premium channels, meanwhile, currently provide their movies and original programs, such as "Spartacus."
The Showtime series still would be part of Netflix's vast library of DVD rentals. The companies negotiate separate deals to cover streaming rights and DVD rentals. Another Showtime hit show, "Weeds," is owned by Lionsgate and will continue to be streamed on Netflix.
Like its parent CBS, Showtime does see a role for Netflix as a digital syndication outlet for older content. Last month CBS announced a $200-million deal with Netflix, but that arrangement only covers classic shows it owns such as "Frasier," "Cheers," "Twin Peaks" and "The Twilight Zone."