The Star Online: Business
The Star Online: Business |
- KLCI up in early trade
- Netflix stock falls as talks on Starz deal unravel
- Asian factories quieter in August
| Posted: 01 Sep 2011 06:29 PM PDT KUALA LUMPUR: The FBM KLCI opened higher in Friday's early trade with the index climbing 33.87 points to 1,481.14 points at 9.01am, with heavyweights lifting the market barometer up. Investors were seen nibbling on selected blue chip stocks after a three-day Hari Raya celebrations hiatus. Among the gainers were Malayan Banking Bhd, which rose 0.23% to RM8.95, Sime Darby Bhd gained 0.21% to RM9, and IOI Corp Bhd perked 0.18% to RM4.69. Regional bourses were mostly down. Tokyo's Nikkei 225 fell 0.82% to 8,986.31. Shanghai's A index was flat at 2,555.93 while Taiwan's Taiex Index was up 0.09% to 7,764.40. Seoul's Kospi Index dipped 0.02% to 1,880.40, and Singapore's Straits Times Index shed 0.09% to 2,864.64. Nymex crude oil lost two cents to US$88.91 per barrel. Spot gold climbed US$1.78 to US$1,827.93 per ounce. The ringgit was quoted at 2.968 to the US dollar. |
| Netflix stock falls as talks on Starz deal unravel Posted: 01 Sep 2011 05:49 PM PDT SAN FRANCISCO: Netflix's negotiations to keep a key piece of its Internet video library have collapsed, dealing a major blow to the largest U.S. video subscription service as it raises the prices for most of its 25 million customers. The setback triggered a nearly 9 percent drop in Netflix Inc.'s stock price. Starz Entertainment delivered the bad news Thursday in a terse statement announcing that it won't renew a contract that allows Netflix to show a lineup of recently released movies and TV shows over high-speed Internet connections. That means Starz content will be removed from Netflix's streaming service starting in March. Starz' library includes movies from Walt Disney Co.'s assorted studios and, until recently, Sony Corp. The talks fell apart after the two sides disagreed over the value of the Starz content and how it should be sold to Netflix subscribers, according to people familiar with the negotiations. The people asked not to be identified because they weren't authorized to speak publicly. The content from Starz' cable TV channel played an instrumental role in increasing usage of Netflix's Internet service and helped Netflix add nearly 17 million subscribers since the deal was signed in October 2008. That growth probably wouldn't have happened without the boost that the Starz deal gave to Netflix streaming, said Janney Montgomery Scott analyst Tony Wible. "What created (Netflix's success in streaming) is frankly, initially getting Starz, getting that content, which got you more subscribers, which allowed you to buy more content," Wible said. "The virtuous cycle that has made Netflix what it is could work against it. If you lose content, you lose subscribers; ... it could be a downward spiral from here." Netflix had been expected to work out a new contract with Starz, although at a much higher price than the estimated $30 million a year that it had been paying under the current agreement. Netflix CEO Reed Hastings acknowledged earlier this year that the company might have to pay as much as $250 million a year to retain the Starz rights when the current contract expires in February. But those hopes were dashed, if not blown up completely, with Thursday's bombshell dropped by Starz CEO Chris Albrecht. The timing of the announcement was seen a way to kick Netflix in the shins at a particularly vulnerable time. It came on the first day of a new Netflix pricing system that will hit U.S. subscribers with price increase of as much as 60 percent if they want to continue to get DVD rentals through the mail along with unlimited streaming of Internet video. The new pricing system has incensed a large group of Netflix subscribers who have threatened to cancel their accounts, a backlash that could intensify if it looks like Netflix's streaming library is becoming less attractive. Albrecht said Starz had decided against a renewal "to protect the premium nature of our brand by preserving the appropriate pricing and packaging of our exclusive and highly valuable content." The contract renewal talks broke down when Netflix refused to meet demands that could have driven up the annual licensing rights to $300 million or more, according to one person familiar with the negotiations. A major sticking point arose when Starz insisted its content be corralled on a higher-price tier, another person said. Instead of making their content available to any Netflix subscriber paying just $8 per month, Starz executives wanted viewership limited to people paying at least $16 per month for a package that bundles DVD rentals with Internet video. That stipulation was seen as a way to preserve Starz' relationship with cable and satellite TV distributors, who include Starz in channel packages that cost far more than the $8 monthly fee for Netflix streaming. Albrecht said Starz, part of Liberty Media Corp., is in an "excellent position" to make more money from other sources besides Netflix. Netflix tried to downplay the possible loss of the Starz relationship. The company, which is based in Los Gatos, Calif., said it would spend the $250 million that Hastings had earmarked for the Starz renewal to buy audience-pleasing content from other distributors. Hastings has left no doubt that he intends to invest heavily in Netflix's Internet video library because he wants more subscribers to use that option. That would allow Netflix to cut postage and other costs to mail DVD rentals to its customers. As it is, Starz has become less important to Netflix as the service expanded its streaming rights. In June, Sony also stopped allowing its movies, which include "Easy A" and "Grown Ups," to part of Starz streaming in June. Those factors have reduced Starz's share of Netflix streaming viewership in the U.S. to 8 percent, according to Netflix. The rising cost for Internet streaming rights is one of the reasons that Netflix raised its prices for people who want to rent DVDs through the mail and stream video. The changes don't affect customers who subscribe to the streaming-only plan. Starz's decision to end the talks with Netflix underscores the escalating tensions with pay-TV services that view Netflix's popularity as a competitive threat. Time Warner Inc.'s HBO has consistently refused to license its shows for Netflix streaming, and Showtime recently has declined to make some of its top series, including "Dexter" and "Californication" available to the service. Morningstar analyst Michael Corty said he thinks Netflix can salvage the Starz deal, given there is still six months before the current contract expires. To do that, Netflix will likely have to pay even more than it intended because Starz appears to have more negotiating leverage, Corty said. Although Albrecht's statement made it sound as if there is little chance of a new deal, Netflix left the door open. "We have tremendous respect for the Starz creative team, and we look forward to someday licensing some of their original or licensed content," Netflix said in a statement. The falling out with Starz added to the worries of Netflix investors already fretting about the higher prices driving away subscribers. Netflix's stock plunged $19.97 to $213.30 in extended trading Thursday, after the announcement by Starz. - AP |
| Asian factories quieter in August Posted: 01 Sep 2011 05:40 PM PDT SINGAPORE: Slumping export demand slowed factory activity in some of Asia's biggest economies in August, although China fared better thanks to solid domestic growth, a series of surveys released yesterday showed. The Purchasing Managers Indexes (PMI) showed manufacturing contracted in South Korea and Taiwan as new export orders fell sharply. China's official PMI increased slightly, the first rise since March, but it also reflected the effects of slowing demand in the United States and Europe. China's overall PMI rose to 50.9 in August from 50.7 in July, according to government data, a touch weaker than economists polled by Reuters had predicted. The new export orders index dropped to 48.3 from July's 50.4. Beijing pinned the blame for the sharp fall in export orders at least partly on the debt crises in advanced economies. The National Bureau of Statistics said the export sector was "facing challenges." Taiwan's PMI dropped to 45.2 in August, the lowest reading since January 2009, which was in the middle of the global financial crisis that crushed world trade. A reading below 50 indicates contraction. "The West's deteriorating growth outlook is becoming an increasingly heavy burden to bear," said Donna Kwok, an economist with HSBC, which sponsors PMI reports in many countries including Taiwan. HSBC's PMI figure for China showed factory activity contracted for a second consecutive month, although the decline was less pronounced than it was in July. HSBC's survey relies more heavily on private companies rather than the large state-owned enterprises that dominate the government's PMI report. Weak economic growth in the United States and Europe has revived worries they will slip back into recession, which would deal a heavy blow to Asia's export-driven economies. Most advanced economies have already cut interest rates to near zero, and with government finances constrained, policymakers have limited options for spurring stronger growth. That leaves the big emerging economies as the best hope for propping up global growth. They may not be up to the task. Credit Suisse cut its growth forecasts yesterday for most Asian economies outside of Japan. "Asian growth is set to slow more sharply than most expect over the coming months," Credit Suisse economist Robert Prior-Wandesforde wrote in a note to clients. China is battling inflation at a three-year high, and Premier Wen Jiabao said yesterday that Beijing would try to engineer a bigger drop in consumer prices in the second half of the year. Chinese officials have said repeatedly that fighting inflation is the top priority despite sluggish growth abroad. Yesterday's data showed input prices rose in China last month, suggesting price pressures remain acute. Brazil unexpectedly lowered interest rates on Wednesday because of concern about a global economic slowdown. China is not the only Asian economy struggling to contain inflation. In South Korea, the consumer price index (CPI) hit a three-year high, up 5.3% in August from a year earlier, marking the eighth consecutive month that inflation has exceeded the Bank of Korea's target. Thailand's CPI was also higher than expected. This puts Asia's central bankers in a bind. Hot inflation points to more interest rate hikes, but the darkening global outlook argues for a policy pause. China provided a bit of a counterweight to the global gloom. It has overtaken the United States and Europe as the top export destination for some Asian countries, so its rapid growth helps to cushion the export decline. That also helped China's factories outperform those in many neighbouring countries. Although export orders fell sharply, overall new orders rose, indicating that domestic business continued to grow. - Reuters |
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