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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.



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RE: I'll take it ...
By RabidDog on 1/20/2010 11:49:23 AM , Rating: 2
I hate to break it to all these movie rental/on-demand/streaming services, but the cost of renting a movie is $1/day. RedBox has set the price. If you pay more, you're a sucker.
Netflix is a neat idea, but for $10/month can you really watch more then 10 movies? Maybe the first month there are 10 movies worth watching, but after that, you are caught up. And who has the time to watch that many movies?


RE: I'll take it ...
By Hiawa23 on 1/20/2010 2:56:22 PM , Rating: 2
Netflix is a neat idea, but for $10/month can you really watch more then 10 movies?

I don't agree, I have over 150 in my Q plus another 100 in my instant Q. I never get caught up, & I never got caught up before the change cause I always had one of the new releases I wanted to watch per week. I have the 2 out at a time plan, & I go through at minimum 6disc movies a week, plus the unlimted streamin, so RED Box wouldn't work for me, especially since they don't offer Blu-ray, plus the whole point of Netflix to me is convenience, no driving anywhere no rush to return anything, just drop em off at the post office on the way to work & immediately the next movie releases & is at my home in a day.


RE: I'll take it ...
By Mitch101 on 1/20/2010 3:35:11 PM , Rating: 2
Its not so much the movies but we watch a lot of the TV series. Like if you haven't been watching Dexter you can watch season 1-3 streamed without waiting for Disc X to arrive. When we get hooked into a series Its great watching several episodes back to back.


RE: I'll take it ...
By MrBlastman on 1/20/2010 3:39:38 PM , Rating: 2
I disagree. I have over 160 movies in my queue and it has only been growing over the last six years that I have been with Netflix. I can't keep up.

The beauty about Netflix is the more you watch and the more you rate, the more movie suggestions they match up to your likes/dislikes that you find to watch that you never thought of. I have seen dozens, if not hundreds more movies because of this that I would never have seen before.

The streaming is just icing on the cake. I still prefer DVD's for the quality, but the streaming more than fits the bill for dialogue and plot intensive movies that are light on action. Even action movies are fine though streaming--I watched Die Hard again recently and it looked pretty good. Same with Grindhouse (it was a short-time streaming offer).

Netflix is totally worth subscribing to if you're a movie buff. I have basic cable still and see no need in getting the premium channels.


RE: I'll take it ...
By Hiawa23 on 1/20/2010 4:28:55 PM , Rating: 2
I disagree. I have over 160 movies in my queue and it has only been growing over the last six years that I have been with Netflix. I can't keep up.

The beauty about Netflix is the more you watch and the more you rate, the more movie suggestions they match up to your likes/dislikes that you find to watch that you never thought of. I have seen dozens, if not hundreds more movies because of this that I would never have seen before.

The streaming is just icing on the cake. I still prefer DVD's for the quality, but the streaming more than fits the bill for dialogue and plot intensive movies that are light on action. Even action movies are fine though streaming--I watched Die Hard again recently and it looked pretty good. Same with Grindhouse (it was a short-time streaming offer).

Netflix is totally worth subscribing to if you're a movie buff. I have basic cable still and see no need in getting the premium channels.


I agree 100%. Netflix has been worth it for me over the years. I too can't keep up, but with this move atleast it will force me to start going through the movies at the middle or bottom of my Q, cause what I would do in the past is I would check Best Buys newspaper every week to see what was coming out on Tuesday then add them to my Q & move them immediately to the top, so I was watching alot of new stuff but skipping over the the stuff in the middle or bottom, so atleast the change has a benefit, other than thatI don't like the fact that


RE: I'll take it ...
By Suntan on 1/20/2010 3:41:04 PM , Rating: 2
I would have to disagree. It depends how much you value your time.

The cost benefit of having them delivered and waiting in my mailbox is worth something to me. Even though I can drive 5 blocks to a redbox and get a DVD there, it still isn’t worth it all the time when I have to go get it *and* return it to the same place.

Finally, Redbox does not offer Blu rays (in my area) and they don’t have the selection of older movies that Netflix does.

-Suntan


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