backtop


Print 74 comment(s) - last by mezman.. on Jan 25 at 4:19 PM


Thanks to cutting new rentals, Netflix has been able to offer new titles like The Matrix trilogy for the first time in streamed form.  (Source: Warner Brothers)
Lack of new rentals won't hurt customers CEO says, and they will get streamed content to boot

Netflix is the biggest player in the by-mail rental business, though it faces tight competition from Blockbuster.  Earlier this month Netflix announced a controversial decision, which took many by surprise -- it cut a major chunk of its new releases.  In return for essentially ending new rentals from Warner Bros, Warner reportedly agreed to cut the company's inventory fees in half.  Netflix has since implemented the agreement by introducing a 28-day waiting period on new releases from Warner.  Warner argued that the move would cut piracy and increase DVD sales.

With similar deals with Fox, Universal, and others near completion and the wholesale discontinuation of new releases from Netflix nigh, Netflix CEO Ted Sarandos has gone on the record with blog Hacking Netflix to defend the move.  He states, "The most practical reason is that the savings derived from this deal enable us to be in stock completely on day 29. Remember that we’re a subscription service and the way that you manage the economics of a subscription service is to manage the demand of any disc, depending on the economics of the disc... The net savings derived from technically creating a better customer experience have been redeployed in additional streaming content for all customers."

In short, Netflix is taking a gamble, cutting new releases in exchange for expanded streamed offerings.  Among the new streamed offerings from Warner are Caddyshack, The Matrix 1, 2 & 3, the entire Dirty Harry film collection.

Mr. Sandros, when prompted if the new rental cuts will cause customers to defect, replies, "I’m always worried about customer defections. We think we’ve created a net-positive customer experience. It’s a little complicated, but we think it’s net-positive for subscribers. If you joined Netflix specifically to rent new releases in the first week of release, you’re probably pretty frustrated because we’re generally not in stock on the first week of street date for everybody, we’re about managing the demand on the disc over the life of the disc. We never really positioned new releases on street date as core to our consumer proposition, much more about all you can eat and low, low prices, in a 100,000 title universe."

While Netflix may be killing new rentals, Blockbuster will likely to continue to offer them, as will Redbox.  While Blockbuster reportedly pays studios a lucrative sum to maintain this relationship, Redbox has practiced a novel approach of buying up new releases from traditional retail channels, after talks with studios fell through.

As the CEO of Netflix points out, Blockbuster, Redbox, and Netflix each offer unique advantages and disadvantages.  It should be interesting, though, to see if Netflix users can suffer not being able to get the latest and greatest, in exchange for more streamed content.



Comments     Threshold


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

RE: Split
By michal1980 on 1/20/2010 11:39:03 AM , Rating: 2
but your not getting the new releases streamed on day 28.

on day 28 you can add it to your list and wait somemore.


RE: Split
By lamerz4391 on 1/20/2010 3:15:59 PM , Rating: 2
Big whoop. I've got 100+ in my queue ... I'll get to it when I get to it. Like I said earlier, if it's that important a movie (LOTR, Star Wars, Iron Man, etc), I will probably have bought it anyway. If it's not that important, well, it's not gonna kill me if I don't see it THE FIRST DAY OF RELEASE.

Much ado about crap, if you ask me.


"My sex life is pretty good" -- Steve Jobs' random musings during the 2010 D8 conference














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki