There are many instances where commercial contracts seem to include terms that cover what will happen if certain very remote possibilities occur. If contract negotiations bog down over these details, some parties may roll their eyes at how contract lawyers seem willing to negotiate over very minute and unlikely-to-happen details.

Sometimes, though, that foresight of the possibilities makes a big difference. One prime example of this is the dispute between Sony Corp Pictures Entertainment and the premium television channel Starz Entertainment. Starz and Sony made a deal for Starz to be the exclusive distributor of Sony and Disney first-run movies, including streaming video over the internet. So what has happened since then that was unexpected? Netflix.

Or, to be more specific, streaming video via Netflix. Netflix has had unexpected strong growth in the last year, and now has more than twenty-two million subscribers. More importantly to the Starz-Sony deal, two thirds of those Netflix subscribers are receiving streaming videos over the internet.

That many streaming video subscribers set off a trigger in the Starz-Sony contract that allows Sony to ask Starz for a better deal in order to remain the exclusive Sony first-run distributor.

The other effect is that Netflix has reached a cap that was put on its streaming agreement with Sony. Starz asked Netflix to stop streaming videos through the StarzPlay service, which Netflix has done.

San Diego contract law attorneys observing the dispute from afar feel safe in making one speculation: that the new deal with Sony will cost Starz and Netflix a lot more money.

Source: Reuters "Sony movies still off Netflix in Starz dispute" 7/20/2011