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Netflix_logoWe’ve known for a while now that Redbox is not the only DVD renter that has a pricing/distribution arrangement Hollywood finds unacceptable. We reported a few weeks ago that several major studios are trying to impose a 30-day rental embargo on all new releases, which would also impact Netflix, the other quickly expanding DVD rental provider.

In our previous piece on the issue, we quoted Netflix CEO Reed Hastings, who said that he was amenable to the proposed delay as long as the numbers were to his liking:

“If we can agree on low-enough pricing,” observed Hastings, “delayed rental could potentially increase profits for everyone.”

According to unnamed sources consulted by Video Business, we now know what Hastings’ definition of “low-enough pricing” is: a 50-percent discount on inventory costs. Warner, Universal and Fox are said to be among the studios in negotiations with Netflix, but according to the same anonymous sources, none of the studios has agreed to Netflix’s terms yet.

Because the majority of Netflix’s business is catalog titles rather than new releases, both the rental company and (again unnamed) studio execs feel that Netflix’s model would not be negatively impacted by a delayed-release window, unlike new release-oriented Redbox.

Regardless of the final arrangement, at least one anonymous studio source feels that change is necessary and likely inevitable:

“The economics with Netflix don’t work for us. . . There are several ways to change the outcome, one way is windowing, rev-share or acquisition price. But the economics need to change.”

Are the studios, which are generally not used to the bitter taste of compromise, going to acquiesce to Netflix’s terms? What impact do you see a universal delay window having on the DVD rental market? We want your opinion.

[via Video Business and Paid Content]

7 Responses to “Netflix Wants a 50% Discount for Delayed Releases”

  1. Visitor [Join Now]
    David [visitor]

    I feel the studios should meet Netflix’s request.

    90% of the movies that I watch are because of Netflix. Very few movies are worth owning. I’m sure other people are in the same boat I’m in.

    I’d be willing to wait 18 months or more for most new movies to be available on Netflix or Redbox before I’d ever consider buying it. I don’t see this driving up sales for the studios …

  2. Member [Join Now]

    funny thing even if netflix gets a 50% cut in price you will never see it.. they will probally drop their 3 at a time for 16.99 to 12.99 and say your getting a great deal….

    3 at a time for 8.50 per month would be worth waiting but will never happen

    • Member [Join Now]
      Mark [rb123456789]

      You act as if the cost of new movies is most of the Netflix subscription cost. No way. Postage has to be their highest expense. 88 cents each DVD they send you (a bit less possibly for presort discounts but still a lot). On a 3 out plan with one turnaround a week per disc (12 a month) that’s about $10 in postage right there.

      Netflix should insist on the 50% discount but agree to buy more copies of each title (up to double the number of copies). 70% of their business is catalog titles, but for those who care about new-ish releases this would provide better availability and make everyone happy. Fewer long waits for new titles.

      • Visitor [Join Now]
        drew [visitor]

        Why should netflix agree to buy more copies of each title (up to double the number of copies). New arrivals are not the main business.
        70% of their business is catalog titles. What business would want to tie up cash in buying more of something that isn’t your top items. They would only have to turn around like any rental place and sell them used at a reduce price. Many would see the resale price as a loss but where your profit is made is in the renting. The used sale of them is just gravy money at that point. Your not making money by keeping the product on the shelf. Excessive product that sits around we all know just gets reduced and sold at a reduce price cutting into your profits.

  3. Member [Join Now]

    : ) forgot about shipping but i think Bulk is like 24 cents each way (maybe 30) Yes if they would say that new releases are 90-95% chance your sure to get them maybe i give them another shot.. but how bad i got throttled last time i was with them in not sure i want to give them another chance

  4. Member [Join Now]

    I am a long time netflix customer, I however disagree and agree. Netflix has a slow turn around with new releases. If a movie/tv show is a popular movie/tv i.e Star trek, califorinication etc, it could take months AFTER the release date to recieve it. I think that if the studios met the requirements then netflix would purchase a few extra copies and this could eliminate that problem. The story says nothing about changing netflix prices, and as far as that goes it pretty good considering the alternatives (buying dvd/tv show, cable, amazon/ITunes on demand) and shipping cost. As far as its catalog goes those new releases become part of it, and while some people believe netflix customer want older films, those older ones actually cost more. If you talk about percents, 30% of people wanting new releases would affect Netflixs greatly. Add to that the decaying postal service and the cost of lost discs. Paying regular prices for non-prompt new releases could put a dent in netflix finances.