Starz, which provides Netflix with over 1,000 movies, will not be renewing its contract with Netflix when it runs out on February 28, 2012. As Starz said in a press release, “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.”

In October 2008 Netflix bought the rights to Starz’s movies for a slim $30 million. Netflix CEO has been so desperate to keep the connection that he said they are willing to pay $200 million to renew the contract even though Starz currently offers about 1500 less movies than they did three years ago.

Things are not looking good for Netflix. Sony already temporarily pulled its movies in June due to contract negotiations with Starz. Netflix stock is also down 8 percent in after hours trading after this announcement. Subscriptions could be even more adversely impacted once the most controversial price hike goes into effect today.

As of September 1, 2011, Netflix changes its price system, as announced several months ago. Packaged live streaming content and mail-in DVD rental is no longer just $9.99. Instead the package deal is $15.98 and singular streaming OR mail-in deals goes for $7.99.

The change of price brought a lot of bad blood to Netflix from customers at a 60% price increase. Many failed to recognize the potential help that many customers who do not fully use both features could glean from the change. Threats of dropped subscriptions flew after the announcement but Netflix has yet to announce such a decrease in sales.

If dropped subscriptions do pan out and Starz pulls its contract for good, everyone’s favorite DVD rental could be in some serious hot water.