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Another Look at Netflix's TV Box
October 17, 2007

What would set-up box actually mean for users, and for Netflix?

For one thing, it wouldn't address the main hurdle for digital downloads: which is not technology, but  intellectual property.

If Netflix were to roll out a set-top box tomorrow, Netflix subscribers would not be allowed unlimted access to Netflix's touted 85,000 titles, but rather the limited offerings available on the company's Instant Watching feature, which streams movies onto a Windows-based PC.

To access the big library, users would have to pay for them or rent them – much the same way you order pay per view through cable.

Those are terms dealt out by the major movie studios. They don't allow their products to be digitally distributed to a subscriber-based service.

It’s not technology, it’s intellectual property.

After their theatrical release, movies typically go first to home video for three to four weeks before they begin their  pay-per-view window. Studios require a transaction per viewing – either a 24-hour rental or ownership.

A Netflix set top box that offers digital downloads of movies onto a TV would fall into this category.

After pay per view, movies enter their "first run pay TV" window. That’s where HBO, Showtime and Starz already have the big titles locked into long term contracts.

(After that they go into an ad-supported broadcast window for the networks and then back again for a second-run pay TV window in a multi-year cycle.)

Starz deals with Disney and Sony, HBO has Dream Works, Fox, Warner Brothers and Unviersal, and Showtime has Paramount and MGM.

Pursuit of Happiness, the Will Smith movie, is about to enter its broadcast window, which Starz has exclusive rights to until April 2009.

“These are long-term deals. Every movie is contractually locked into a 9 to 10 year deal window scheme,”  says Bob Greene, executive vice president with Starz.

Starz knew it was going to get Spiderman 3 well before the movie came out, simply because they already had the full production slate for Columbia Pictures, which is owned by Sony.

He added, “Netflix did a wonderful job -- when they finally announced Watch Now – they culled together some movies from the major studios.”

The rest are non-theatrical titles, older movies, or foreign films, he said.

“They got Pan’s Labyrinth,” he said. “But they can't offer Spiderman 3.”

Posted by Ned Randolph on October 17, 2007 | Comments (0)