Chutzpah. It’s a great Yiddish word that implies daring, audacity and even arrogance. It also perfectly describes the actions of three major Hollywood studios lately. Universal, Warner Brothers and Fox, while still deeply mired in a messy lawsuit with Redbox, are now starting to put the squeeze on Netflix. The reason is the same: the studios aren’t happy with their end of the deal and want more money.
According to BusinessWeek’s sources, Warner has given Netflix a “‘take it or leave it’ style offer: pay the studio more or pay a lesser amount and receive DVDs sometime after they are shipped out to retailers like Wal-Mart, Best Buy or Blockbuster.” Universal and Fox are also alleged to be involved in other, similar negotiations. The studios clearly feel threatened by the much-discussed decline in DVD sales, and are attempting to gain a larger share of rental market profit to compensate.
This is a complicated issue that has burned up a lot of pixels on this website and many others, and has supporters on both sides of the fence. I’m fully aware that studios are in business to make money first and foremost—quality products and customer relations are ancillary to the bottom line. That being said, consumers vote with their wallets, and being perceived as bullying, out-of-touch and greedy doesn’t do a company any favors, a fact Redbox is attempting to leverage.
Are the big bad studio execs just trying to grind a few more shekels out of poor, innocent Redbox and Netflix? Or is this a reasonable, long-overdue correction to a flawed pricing arrangement? As always, Insiders, we want your thoughts on the matter.