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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By streak24 on 1/7/2010 7:38:10 AM , Rating: 2
Where the heck did you pull this steaming pile o' crap out of Mick??

It took me all of two seconds to surf over to the Netflix page and find the actual press release detailing this deal with Warner Bros ( Nowhere in the press release does it state that this is a move to combat piracy. Worse yet, you don't even say what Netflix received in return for providing a 28-day sell window to WB.

Let me help you out here by actually quoting part of the press release so Daily Tech readers aren't completely led astray by this shamble of a blog posting...

"New release titles on DVD and Blu-ray will be made available to Netflix members after a 28-day window, giving Warner Bros. the opportunity to maximize the sales potential of those titles and Netflix the benefits of reduced product costs and significantly more units and better in-stock levels four weeks after street date. At the same time, a renewed and expanded license for Warner Bros. streaming content will allow Netflix to offer its members more movies they can watch instantly."

So boiled down, this means Netflix gives WB 28 days to sell its new releases before they are available for rental on Netflix. In return, Netflix will now have more units available to send out after the 28-day window and will also have more streaming content available from the WB catalog for those who like to watch instantly.

Oh...and if you are going to reference an article, please be sure the actual article you are referring to is relevant and timely. The article you referenced about "new rentals is fueling rampant piracy of films" is almost two years old and says nothing about a connection between rentals and piracy. Did you link to the wrong reference or did you just make that up as well??

By kattanna on 1/7/2010 10:02:30 AM , Rating: 2

i read about it here

Newly released DVDs account for about 30 percent of Netflix's shipments

so this delay will only affect 30% of their client base, but..

Warner Bros. already has agreed to contribute hundreds of additional movies to that service — triple the current catalog. They will include many titles that have only been out on DVD for three to eight months

that will be a boon to them all.

but facts dont make for a sexy headline and troll like postings i guess.

By mydogfarted on 1/7/2010 10:18:39 AM , Rating: 3
so this delay will only affect 30% of their client base, but..

I'm pretty sure if I told my boss I was going to do something that could piss off 1/3 of our customers, I'm pretty sure I'd be fired on the spot.

By kattanna on 1/7/2010 11:56:21 AM , Rating: 2
your assuming 100% of those people will be outraged by this, which would be false.

i dont care if its another month later cause i dont usually see any movie on netflix that hasnt been out for some time as my queue is long. also whenever a new release does hit, i have watched the wait times from my queue listing and i could easily have to wait that extra 4 weeks anyways. so them being able to get 50% more DVD's when it does launch for them would actually be a good thing.

in fact, for me, this deal might mean i see those films from warner bros sooner as they might be on the instant watch list.

will there be a few people that this will not be acceptable to, you bet. and they are free to voice their dissatisfaction by canceling the service. but for the majority of netflix's customers, this will most likely be a good thing.

"We are going to continue to work with them to make sure they understand the reality of the Internet.  A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis

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