A few months back, we brought you word that several studios were mulling a Redbox-style delay on all new release titles. Speculation at least partially came to an end yesterday with the news that Netflix and Warner Bros. Home Entertainment had entered an agreement stipulating that Warner will continue to provide Netflix with new release titles. The caveat is that those films won’t be available to Netflix’s subscribers for 28 days following their release date.
According to Home Media Magazine, “the month-long window was chosen after sales data suggested 75% of sellthrough occurs in the first four weeks of release”. In addition, Warner will “significantly upgrade Netflix’s selection of direct-to-video titles and catalog movies available for [Netflix’s] instant streaming platform to Web-enabled TVs and computers”.
Netflix feels that the deal is a win for them because only about 30% of the company’s revenue comes from new release titles, and it stands to greatly expand its Warner catalog streaming offerings. Says company spokesperson Ken Ross:
“The way we merchandise all content available is more around connecting you with a movie you will love versus a movie that came out yesterday,”
Ted Sarandos, chief content officer for Netflix, echoed Ross’ sentiment:
“We’re able to help an important business partner meet its objectives while improving service levels for our members by acquiring substantially more units than in the past after a relatively short sellthrough window. . . At the same time, we’re able to extend the range of choices available to be streamed to our members.”
According to Michael Pachter, an analyst with Wedbush Morgan Securities, Netflix is probably paying Warner identical content costs in exchange for higher unit volumes after the delay. Says Pachter:
“If they bought 1 million copies of one title at $12 before, they will now buy 1.5 million copies for $8 and get it 28 days later,”
Pachter also feels that Blockbuster and Redbox will benefit from the deal, as it serves to level the playing field in the highly competetive DVD rental market.
Will other studios soon follow Warner’s suit, Insiders? Could we be looking at a blanket moratorioum on new release rentals in the near future? Would consumers respond to such a situation by purchasing more films, as Hollywood hopes, or are they more patient than the studios give them credit for?
[via Home Media Magazine]