Print 98 comment(s) - last by MrPoletski.. on Jan 14 at 6:15 AM

Arrgghhh this will show those pesky pirates -- we'll cut one of our hottest items!

Netflix revolutionized the movie rental industry when it began offering unlimited movie rentals for a monthly flat rate.  Since 2007, a $16.99 (plus tax) monthly membership fee has granted you access to up to three movies at a time, with unlimited exchanges.  While Blockbuster rushed similarly priced plans to market, it was arguably too little, too late -- Netflix was already a major player and owned many key patents.

Despite that resounding success, all is not rosy for Netflix.  Netflix has been under fire from movie industry, which claims its unlimited deliveries of new rentals is fueling rampant piracy of films.

Under pressure, Netflix just announced that it has incredibly consented to enter a deal with Warner Bros. that will essentially begin to kill its new release program under the premise of fighting piracy.  Under the agreement, Netflix agrees to not offer new releases until 28 days after the DVD/Blu-Ray release goes on sale in stores.

Netflix COO Ted Sarandos appears to have wholeheartedly embraced the idea, which he originally suggested to studios in 2007.  Netflix likely gets a major kick back from the deal, though; if the terms of Mr. Sarandos's original pitch hold true, Warner Bros. will cut its inventory costs with Netflix (the amount it charges the company for its movie stockpile) by 50 percent.

Describes Mr. Sarandos enthusiastically, "Creating a rental window is not a punitive action. It’s a decision that the retailers and studios can make together. If the studios can entice a rentailer to create a rental window, I believe that rentailers, studios and consumers can all benefit from it."

With that attitude and the mutually positive reaction from Warner Bros., it seems likely that other movie studios will follow in suit, signing agreements to cut inventory cost in exchange for no more new rentals.  Netflix is reportedly in advanced talks with Fox and Universal as well.  Other unnamed studios are also discussing similar plans with the rentailer.

For both Netflix and the movie studios the plan is a risky gamble.  Without new rentals, Netflix risks being undercut by Blockbuster.  While the inventory cost cuts ultimately result in a greater monetary gain on paper (as 70 percent of Netflix rentals are from older catalog titles, with approximately 30 percent coming from new releases), whether customers will stomach the change is questionable.

Likewise for movie studios, if customers do accept the deal, but it does not significantly affect buying rates/piracy, the studios stand to lose a great deal of money offering movies to Netflix at greatly reduced rates.  In all likelihood, the biggest loser, though, will be Netflix customers who may soon lose access to the hottest new rentals, which Blockbuster will continue to provide.

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More bull from the movie industy....
By rdawise on 1/6/2010 9:59:20 PM , Rating: 2
Let's face it, Netflix does not care about the consumer on this one. From their point of view, they already have most of Blockbuster's customer so crap deals like this won't hurt them. They have nothing to lose here and everything (money) to gain. The only thing that would make them recant this action is if customers cancel their subscription on a mass scale (which won't likely happened because people are lazy and this isn't widespread news).

Studios like WB know that new rentals have nothing to do with piracy. They just want you to buy the DVD so they can get the money instead of rental companies. It's as simple as that.

How is this supposed to stop piracy anyway? A person can still get the DVD, burn it to hard drive, and upload it to the net. You think cost will be a deterrent? Ever heard of theft?

I call bull on both parties, but can't blame Netflix though...

RE: More bull from the movie industy....
By mcnabney on 1/6/2010 10:29:16 PM , Rating: 3
Actually, they are likely to give Blockbuster a lot of their customers over this.

Blockbuster has the same pricing tiers, but does not have streaming like Netflix.

However Blockbuster does provide BluRays with no added fee and provides a lot of other discounts. In addition, an extra $3/month allows you to have five instant movie swaps at the store. So this will almost guarantee quick access to new releases using the Blockbuster service. Netflix has already stated that 30% of their rentals are new releases, but that is huge when you consider that at any given time there are 100k movies available, but only 50-100 of those would be considered a New Release. Expect Blockbuster to make some hay over this. Now I have thought about it, I think I will switch.

By Fox5 on 1/7/2010 2:32:48 AM , Rating: 2
Blockbuster does have streaming.

“So far we have not seen a single Android device that does not infringe on our patents." -- Microsoft General Counsel Brad Smith

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