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 RealTheXev on 1/7/2010 8:23:45 PM , Rating: 1
I’ve read many of the comments here and it is obvious that not many people know what piracy is becoming. I lived in Kissimmee FL for 3 years so it makes more sense to me. Put any thoughts of computers and internet out of your mind.

Imagine you pull up to your local neighborhood gas station, and a strange person walks up to you, pulls open a DVD binder, and offers to sell you the latest releases, in a combo bundle for $10. I think a lot of people buy these things just because they are afraid of the people who suddenly come up to them, but some are genuinely interested. They don’t know about image quality or anything like that, they just want a deal on movies. This was getting common place in that are when I moved back home to Pennsylvania in mid-2008. I tried my best to get the cops to arrest these peddlers, but they are gone before you get a chance. It’s obvious a lot of these guys probably have a Netflix or Blockbuster with all the newest releases on their list, and they make a copy and send it back that day with something like DVDShrink, then go out and start selling them. They don’t care about DVD5 or DVD9, or how the movie looks.. they just wana make a buck. This was happening everywhere in the area too.. it was not isolated. Once one person started doing, a bunch of people were.

I’m surprised a move like this wasn’t taken long ago, honestly… Blockbuster would be wise to follow suit.

"Mac OS X is like living in a farmhouse in the country with no locks, and Windows is living in a house with bars on the windows in the bad part of town." -- Charlie Miller

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