Netflix likes price-window tradeoff
By Susanne Ault -- Video Business,11/06/2009
NOV. 6 | PHYSICAL: Netflix will accept a one-month delay on new releases—an option it is discussing with several major studios—but only if its inventory cost is slashed by as much as half, according to sources.
The subscription rental company is believed to be discussing such an arrangement with Warner Home Video, Universal Studios Home Entertainment, 20th Century Fox Home Entertainment and possibly others. None of the studios has agreed to drop prices as much as Netflix wants, sources said.
The same three studios have already imposed a window of at least four weeks on rental kiosk operator Redbox, as they strive to either push low-cost rentals into a later window or realize more profit from kiosks and subscriptions.
Redbox is suing the three studios and stocking its kiosks with their titles bought at retail, but Netflix is more willing to take new releases in a later window for reduced title costs. In fact, insiders say it’s an idea Netflix pitched to studios several years ago.
“Creating a rental window is not a punitive action,” Netflix chief content officer Ted Sarandos said. “It’s a decision that the retailers and studios can make together. If the studios can entice a rentailer to create a rental window, I believe that rentailers, studios and consumers can all benefit from it.” He would not comment specifically on the pricing Netflix is looking for, but did confirm it is seeking discounts in exchange for the window.
Warner has publicly confirmed its current window negotiations with Netflix. Spokespeople for Fox and Universal declined comment on window considerations with Netflix.
Netflix’s core business is catalog transactions, which make up about 70% of its revenue. That should help ease an introduction of a 30-day delay on new releases, since most Netflix customers are relatively more interested in older content. Redbox, with nearly 100% of its business in new releases, sees the delay as more oppressive to its operations.
Studios and other sources note that Redbox and Netflix are the focus of delayed rental windows because they have much more momentum that bricks-and-mortar stores and are consequently viewed as the biggest threat to consumer sales.
“They’ve definitely grown and are a significant leader in the rental market,” said one studio executive of Netflix. “With a 30-day window, it won’t hurt their model. And they can help us overall with sales revenue.”
Studio sources said Blockbuster has been left out of the window discussion because it orders more product from the studios than Netflix and Redbox and pays a relatively high price for titles.
It’s unclear whether windowing at Netflix is imminent, but the rate at which the company is adding subscribers—it’s now at more than 11 million—is pushing studios into action.
“The economics with Netflix don’t work for us,” said another studio source. “There are several ways to change the outcome, one way is windowing, rev-share or acquisition price. But the economics need to change.”
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| Submitted by: | Tom 11/13/2009 8:57:17 PM PT |
| Location: | midwest |
| Occupation: | video store owner |
I don't think netflix makes money from new release dvd's and they do not promote them, they are there but you have to look for them. If anybody from the movie studios ever reads the comments please read this, I own a few video stores, business is not like it use to be, the studios blame downloading and redbox for the decrease in dvd sales. I received a phone call at my video store about an employee of mine that was recording and selling copies of the new release movies for $3.00 6 days before release date. (we get the dvd's early from the distributor so we have time to get them ready for rental) We allowed our employee's to take the dvd's home and watch them before release date. It seems that with almost every laptop computer bought now there is a dvd burner in it, the software to make the copies is easily found on the internet. We fired the employee making the copies and we do not let the other employee even open the shipment of dvd's until monday now. Our business is up 30% in our stores since changing our policy. Can you imagine how many copies were made 6 days before release date that got passed around town? You can make a copy of a copy of a copy ect. and its just as good as the original.
Figure out how to stop the illegal software and make better copy protection and the studios will be back in the green again.
| Submitted by: | BC 11/11/2009 6:18:42 PM PT |
@SF, I have never had a problem finding new release movies I wanted to see. I have been a Netflix customer since the company launched. Not sure why you think they hide new releases. There is a prominent link at the top of the page for new releases. How is that hiding them?
| Submitted by: | Rob 11/11/2009 6:05:30 PM PT |
How would I know the difference?? New releases go straight to long wait in our area anyway. As much as I hate the idea, I would not cancel since I have other things in the queue anyway...
| Submitted by: | Kit Kimes (kitkimes41@comcast.net) 11/9/2009 11:00:30 PM PT |
| Location: | Oswego, IL USA |
| Occupation: | retired EE professional/current CE retail sales |
That isn't really a problem for me. There are a lot of sources for weekly releases of movies/tv shows on DVD. When I see one I want to see, I just go on Netflix, search for it (it's always there) and click add to wish list. When it's available, it automatically gets added to my que and I can move it to the top if I want to. I think Netflix users are pretty active in manageing their ques. I know I'm looking at it a couple of times a week, more if I am looking ofr something in particular.
| Submitted by: | SF 11/9/2009 1:13:00 PM PT |
| Location: | CA |
If Netflix's customers are focused on catalog titles it's because Netflix has done everything they can to hide new releases from its customers. They used to have a link that would show you what was coming out every week but they've hidden it so they don't need to buy as many copies. They also redesigned their website to push customers into selecting catalog movies as well. I am quite sure that that 70% figure wouldn't be the case if Netflix wasn't so aggressively making it difficult to get new movies.
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