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.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

RE: So, to clarify
By quiksilvr on 1/7/2010 12:52:39 AM , Rating: 3
Come on, people. This obviously isn't about piracy. They want people to buy the DVDs not rent them. So to avoid a cheap way to rent before you buy when its released, they make you wait a month so that those that can't wait frigging 4 weeks (which is quite a number of people) will buy it or rent it at Blockbuster.

IMO, this is a conspiracy that Blockbuster cooked up with Warner Bros. They say "go public about piracy issues" and send some money down Warner's way so that they can rack up some rent points.

So I say to consumers out there. Don't go to Blockbuster or Hollywood to pay insane prices towards rentals. Wait a month. Show them it doesn't make a difference. And give Netflix your business and tell Blockbuster to go f*ck themselves.

RE: So, to clarify
By ChristopherO on 1/7/2010 1:51:52 AM , Rating: 1
And give Netflix your business and tell Blockbuster to go f*ck themselves.

So you totally read the article backwards? Netflix is screwing me because I can no longer get new releases, so I should continue to do business with them? Almost all my rentals are new release Blu Ray. Why? Because I don't need to pay $20 (at the cheapest) from Amazon for a title that might be spotty at best, but I don't want to wait around to see.

Whereas Blockbuster charges the same price for their service (actually less for Blu Ray) and they *will* have new releases? Technically I'd pay the same at Blockbuster, because Total Access costs the same as the "blu ray add-on" with Netflix.

How exactly am I hurting anyone other than myself here by not switching to Blockbuster? And with Total Access -- I can just get films at the local store. Netflix streaming is nice and all, but I don't stream 5 movies per month. But I might have an urge to exchange 5 at Blockbuster, which has a store 2/3rds of a mile from here.

And there is no way this is about piracy. Blu Ray is still pretty darn secure. If they left the Blu Rays as day-and-date, but delayed the DVDs, that might led a tiny bit of credibility to their arguments.

The funny thing, in the 80s, rental windows were in reverse. Video stores could rent movies almost 6 months before you could buy them. How times have changed.

RE: So, to clarify
By TheDoc9 on 1/7/2010 9:53:08 AM , Rating: 3
That's what I was thinking as well, not about blockbuster. Just a way for the studios to increase sales. Get some PR in by blaming it on piracy.

I think Blockbuster is just a lucky bystander in this case, as there's no guarantee many people will move to them. Netflix rarely pushes new releases as it is, I see this being a non issue.

RE: So, to clarify
By therealnickdanger on 1/7/2010 10:20:31 AM , Rating: 2
Come on, people. This obviously isn't about piracy

Exactly. They think they will increase sales with this. The sad part is that they're probably correct. Most people are very impulsive and lack any form of patience. But this will only increase piracy on an equal scale.

Warner is only kicking themselves in the ass on this. Most people aren't willing to fork over the $20+ for new releases, so they rent them on Netflix to watch them before buying. In my case, I'm very picky about buying Blu-Ray discs. The transfer has to be of the utmost quality for me to shell out my money. The only way to know for sure is to rent it or rely on the judgement of respected website reviews. If I or reviewers can't get copies, then I'm just going to wait until I can get it from Netflix. By that time, the movie will be on sale and Warner will have missed a chance for me to spend more on a movie that I potentially would have bought very near to release.

RE: So, to clarify
By mikefarinha on 1/7/2010 11:26:51 AM , Rating: 2
I agree.

When a new move is released to disk it is usually accompanied by some sort of marketing campaign. The studios can't capitalize on the burst of interest from a new release when many people can watch the movie via Netflix.

I think that the movie and music studios realize that the digital revolution is going to eat them alive.

The Studios' MO now is simply to push back the inevitable as long as possible.

RE: So, to clarify
By callmeroy on 1/7/2010 11:35:31 AM , Rating: 3
I don't have to tell block buster go to "eff" off.....they are closing down in droves around me already...

i know of two at least -- the one that used to be my preferred one location wise -- yeah its now a dunkin donuts, then about 2 miles from that one another block buster just closed. Finally, my parents told me that their's is closing this month -- they only live about 10-15 miles from me.

So all in all I think BB is on the way out least around here.

RE: So, to clarify
By Spuke on 1/7/2010 12:25:58 PM , Rating: 2
All of the Blockbusters closed down where I live. There are some mom and pop shops but I use Netflix exclusively. Super convenient. Kind of pissed about the new releases but not going to jump ship just yet. I'll wait and see what Blockbuster does first.

RE: So, to clarify
By elgueroloco on 1/8/2010 4:04:08 PM , Rating: 2
All Blockbuster stores are closing nationwide. Blockbuster is changing their business model to a combination of mail, online, and kiosks, and abandoning storefronts altogether.

At least, this is what I heard when we asked the employees at the soon-to-be-closed local Blockbuster about it. I can't find anything about it in the news.

RE: So, to clarify
By beerhound on 1/7/2010 3:51:29 PM , Rating: 2
Exactly on target, here is a quote from an article on another site:

"Warner Home Video president Ron Sanders made no attempt to hide the reason for the delay. "The 28-day window allows us to continue making our most popular films available to Netflix subscribers while supporting our sell-through product," he said in a statement. Warner emphasized in its announcement that 75 percent of sell-through (that is, DVD sales) occur within the first four weeks of release, and that Netflix would benefit from this deal because it will see reduced costs and better availability of new releases."

This has nothing to do with piracy. It is all about trying to get people who might have rented through Netflix to buy from Warner instead.

"It looks like the iPhone 4 might be their Vista, and I'm okay with that." -- Microsoft COO Kevin Turner

Most Popular ArticlesSmartphone Screen Protectors – What To Look For
September 21, 2016, 9:33 AM
UN Meeting to Tackle Antimicrobial Resistance
September 21, 2016, 9:52 AM
Walmart may get "Robot Shopping Carts?"
September 17, 2016, 6:01 AM
5 Cases for iPhone 7 and 7 iPhone Plus
September 18, 2016, 10:08 AM
Update: Problem-Free Galaxy Note7s CPSC Approved
September 22, 2016, 5:30 AM

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki