Thursday, January 07, 2010

The Netflix - Warner Bros Deal

If you haven't heard about it yet, Netflix has entered into an agreement with Warner Bros. that delays mailing out any of the studio's new releases for 4 weeks after the DVD release date. This means, if you're hoping to catch something on Netflix that you missed in theaters, and it's a WB release, you'll have to wait nearly a month longer to get it in the mail.The flip side of this is that, by agreeing to wait 4 weeks (and potentially lose some subscribers and give Blockbuster an initial upper hand - currently there doesn't seem to be any expectation that Blockbuster will enter into a similar agreement), WB is going to grant Netflix access to a lot more of its library for Instawatch streaming. (Warner Bros. has agreed to give Netflix a large discount on DVDs to mail out and will significantly increase the instant viewing catalog, including adding many more recent releases - films released to DVD in the past three to eight months.)

The basic reasoning behind this is twofold (and benefits both companies). WB - and most DVD distributors - make the bulk of their DVD sales within the first month of a DVD's release, with nearly 75% of sales being made in that time frame. By waiting 28 days to send something through Netflix, they increase their sale revenue, as opposed to losing it to rentals that they can't really cash in on. Netflix, on the other hand, saves on postage by upping the amount of instant video streaming they do. Currently, about 30% of Netflix rentals are new releases, but Netflix heads don't believe the new business plan will negatively affect the company.

John August recently posted his take on the new agreement between Warner Bros. and Netflix. If you're a Netflix subscriber, you might not like the plan. If you're a writer, though, check out John's take on why this might actually be a good thing for you. The increased sales and increased instant viewing selection both benefit writers, who earn residuals from sales and online streaming. Writers do not make money off of discs mailed out as subscription rentals.

The deal, which was just announced yesterday, goes into effect almost immediately, with Ricky Gervais' THE INVENTION OF LYING being one of the first titles delayed. MSNBC has a more in-depth look at the deal.

1 comment:

Onyx said...

Sweet. Instawatch gets better, it helps the writers, and the gf can keep using our dvd requests for crappy documentaries.