The setback triggered a nearly 9 percent drop in Netflix's stock price. That means Starz content will be removed from Netflix's streaming service starting in March. The content from Starz's 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. "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. 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. Netflix tried to downplay the possible loss of the Starz relationship. As it is, Starz has become less important to Netflix as the service expanded its streaming rights.

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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. 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. 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.