
Netflix Caves to Warner Brothers - Flemlord
http://www.techcrunch.com/2010/01/07/netflix-hollywood-deal/
======
nfnaaron
I don't understand the anguish over a 28 day delay. Actually I don't even
understand the interest, beyond how it relates to the eventual take-over by
streaming.

You had a chance to see the movie in theaters. You either saw it or you
didn't. The DVD comes out for sale. You either buy it or you don't. 28 days
later the movie is available for rental, however long after the theatrical
release. It just increases the wait time from the theatrical release by 28
days. ?

By the author's own definition, if you're renting at all instead of buying,
it's crap. It's OK to wait 28 more days for crap. I may have even said this to
my 12 year old in another context.

It's an amazing amount of text for such a trivial issue. What am I missing?

[Edit: added 2nd to last paragraph; the "crap" paragraph.]

~~~
akeefer
I totally agree . . . I really don't pay any attention to DVD for-sale dates,
and only pay attention to the date it's available according to my Netflix
queue. It's already the case that the time from theatrical release to DVD
seems to vary pretty widely and arbitrarily between films, so an extra 28 day
delay wouldn't register on my radar in the slightest. If I hadn't read about
this deal, I never would have noticed any sort of delay.

~~~
anigbrowl
The variation is a function of how well the film does on release. The faster
it goes to DVD, the less it has made at the box office. There isn't an exact
formula but there are a lot of rules-of-thumb. For example, the best time to
launch a horror movie is in early October (because of Halloween), and then
you'll get it to DVD pronto because most horror movies have a short shelf life
so you want the fans to buy it for themselves for Christmas. Animations and
action thrillers are timed for summer and winter holidays. Screwball comedies
are timed for spring break (youth) or thanksgiving (romantic). Arty dramas
release near Christmas partly because of holiday viewers but also to meet the
deadline for consideration during the q1 awards season without spending too
much on pre-marketing; the DVD will be held back until after the nominations
and awards ceremonies have taken place, because an Oscar or a Golden Globe
will increase sales.

The film sales markets (where producers sell to distributors) also take place
in Q1, so if your goal is to make the hit horror for 2011 you start planning
now to shoot in summer so you can be done editing by fall and sell it in
winter so you can market it during summer for people to see during fall and
buy during winter. Whew!

------
jsz0
_"More importantly, they’ll have more streaming rights for the content from
these studios under this deal."_

28 days is a small price to pay for an improved streaming selection.
Especially with Warner Brothers who has a massive catalog of titles. If you're
not seeing it in the theater, not buying the DVD, chances are you really don't
_absolutely need to_ see it in the first 28 days either. Pretty good deal by
Netflix.

~~~
ghshephard
On the flip side - this just opened up a _huge_ opportunity for a Netflix
competitor to start offering DVDs that are recently released but not available
from Netflix.

People like new things. Netflix will no longer be offering new things. That
smells like market opportunity to me.

~~~
anigbrowl
As I said to pg, if the studios don't want to sell to Netflix because it would
cannibalize their DVD sales, what makes you think they'd want to sell to
'newflix'? If you try buying films and renting them out on the first day of
the DVD release, you'll get slammed for copyright violation about 5 minutes
after you ship to your first rental customer. Consumer DVDs are not licensed
for public performance or rental.

~~~
elq
simply not true - <http://en.wikipedia.org/wiki/First-sale_doctrine>

~~~
anigbrowl
Please see my reply to your similar post below, where I explain in detail why
I dispute the accuracy of this particular wiki article.

------
dangrover
Ah, okay, so during those 28 days, people who don't want to go out to the
store and buy a DVD of the movie will simply torrent it.

~~~
TrevorBramble
It's amazing to me that big media still doesn't understand that competing on
convenience is how they will turn casual thieves into happy customers.

Making your products as easy or easier to consume by legal means than not is
how to win.

~~~
houseabsolute
Seems to me like they probably did some kind of cost-benefit calculation that
factored this in. They probably looked at it and said, "Rentals of DVDs that
might otherwise have been bought are hurting us more than piracy that could be
avoided by the earlier rentals." And, given how few pirates are likely to ever
be paying customers (as piracy advocates frequently trumpet when studios issue
bloated piracy cost numbers), I can see how this analysis might turn out to
favor their current course of action.

~~~
pyre
> _And, given how few pirates are likely to ever be paying customers (as
> piracy advocates frequently trumpet when studios issue bloated piracy cost
> numbers)_

The argument is more of "1 download != 1 lost sale" because I can download and
watch more movies for free than I could afford to watch at all but the lowest
of prices. And even then "1 download != 1 watched movie" because I might be
someone that is compulsively downloading as much as I can. In that case, the
amount of movies that I can download is only limited by the bandwidth
available to me (and the access to downloadable pirated movies). I could
easily be downloading more movies than I could afford to buy/rent at _any_
price. Therefore saying that each movie I've download is a 'lost sale' is
disingenuous because converting me to a paying customer would only net you a
revenue for a fraction of the amount of movies I've downloaded.

The people that are compulsively 'hoarding' movies are not likely to become
paying customers, but what percentage of downloaders/pirates are they? The
studios don't have the answers to these questions as much as they might like
to seem like they do. They only trot out the raw numbers for shock value,
though I wager that behind closed doors they might have a better understanding
that these numbers are bunk.

~~~
houseabsolute
> though I wager that behind closed doors they might have a better
> understanding that these numbers are bunk.

The sentiment behind that wager is why I think this deal with Netflix is
calculated, and that the outcome will be favorable (short run, long run all
bets are off) for both the studios and Netflix.

------
boredguy8
I was trying to think of the properly inflammatory headline when I submitted
[http://arstechnica.com/media/news/2010/01/netflix-and-
warner...](http://arstechnica.com/media/news/2010/01/netflix-and-warner-bros-
have.ars) (a far better writeup). I should leave it to pros like TechCrunch.

------
fjabre
Netflix's on-demand selection does need drastic improvement.. One can find
some gems here and there but overall it doesn't touch their DVD selection and
we all know that's b/c of the studios.

Yes it is too much work to walk down to my mailbox and wait 2 days for my damn
DVD when the technology is there to deliver it straight to my TV in seconds.

Of course this all would have to come at a price but I would gladly pay 20 or
30 and possibly even 40 bucks a month to have unlimited access to their full
DVD collection on-demand.

Shelling out 20 bucks for something you'll end up watching once or twice 95%
of the time is throwing away your money. So until they (the studios) stop
attempting to rip us off like the greedy bastards we know they are then I'll
get the new releases elsewhere for free.

There is an ideal price to be set on the curve where everyone wins it's just
that the aging execs in charge can't change fast enough to keep pace with
their consumers changing preferences. Time to get someone new in charge..

~~~
akeefer
Keep in mind that it's not _just_ because of the studios: it's also because of
the various TV networks that the studios have signed exclusive re-broadcast
deals with. That's why Netflix sublicensed the Starz's rebroadcast rights, and
why those movies rotate in and out of being available to play on demand (since
the rebroadcast rights are all windowed to specific periods of time, with
different broadcasters getting the rights at different points in time).

So it's all a very complicated problem. Movies that already have the
rebroadcast rights sold off would be tough without the sort of cross-licensing
Netflix does with Starz; the studios don't really have further control until
those deals expire, since they're legally-binding, exclusive contracts.
Rentals don't conflict with those exclusive rights, which is why the studios
can license Amazon or iTunes to offer the movies for a fee, but can't license
Netflix to stream them.

What they could do is to stop doing those sorts of exclusive deals, but those
deals bring in a fair amount of money, so someone like Netflix would need to
pony up enough cash on their end to make up for the loss of revenue that would
come with either the total loss of those broadcast deals or with the loss of
exclusivity on those broadcast deals. But I'm sure that even renegotiating
non-exclusive contracts to use in the future deals with existing broadcasters
would take a pretty long time once they've decided to do it; those sorts of
legal maneuverings take a long time.

So certainly the studios could start trying to do something about it, but it's
not a simple problem that they could just change their minds about and make go
away instantly.

~~~
anigbrowl
Exactly. And those re-broadcast and rental contracts are part of the surety
that producers must assemble in order to persuade investors to put in the
money for production. The consumer-facing distributors pay in arrears, but
production expenses have to be paid in time or in advance, and marketing is
also paid in advance.

------
robryan
For me, not that I use netflix, the 28 days doesn't seem like that big of a
deal to me. If I really want to see a new release it will be in the cinema
which is a much better viewing experience unless you happen to have an
expensive home theater, if I didn't see something while I was at the cinema
your already waiting a couple of months, I just couldn't see to many
situations where I have no interest in the movie at the cinema but could wait
the extra 28 days.

I don't know if this increases piracy because most of the time you will be
able to get a DVD quality download before it's even been released to rent and
buy.

------
gte910h
"More importantly, they’ll have more streaming rights for the content from
these studios under this deal. This is the key."

Um, I'm not currently a netflix customer because of how small their streaming
selection is.

I'm going to say, the fact you can't get new releases anyway ("long wait"),
means they're basically vastly increasing their offering of streamed
movies....something they have unlimited capacity to do, while decreasing a
service that sucked anyhow and was virtually useless.

I don't see why they're doing something bad here.

------
vaporstun
I'd gladly trade 28-days on new releases for more streaming content.

With Watch Instantly on Netflix, I rarely bother with physical media anymore.

~~~
jrockway
With Bittorrent and Usenet, I rarely bother with Netflix Instant anymore.

~~~
ja30278
sshhh..remember the first rule of usenet

------
Micand
iTunes proved that people are willing to pay rather than pirate if you make
purchasing more convenient than pirating. The movie studios seem almost to be
begging their customers to steal content.

------
pg
This could be an opening for a startup.

~~~
anigbrowl
I seriously doubt it, Paul. DVDs bought by consumers are saddled with
extremely restrictive license terms. When Netflix or any other rental business
buys DVDs, they don't just buy the same copy you and I do, but a rental
version with different licensing terms which costs considerably more - I
forget how much, but I think's around $80 per disc, though that's probably
gone down somewhat. The content is (almost always) identical but the product
code is different.

How can you provide a rental service to people during the 28-day DVD sales
window without breaking the license terms? That's basically pay-per-view, and
PPV is dead from the distributor's standpoint, there is almost no money in it
now.

Part of the problem (for the distributors) is not that netflix rents to
everyone, but that they don't charge any late fees. for years the video
business made profit in 2 ways: new hit films that everyone wanted to watch
but couldn't buy yet, and late fees - both of which subsidized all the other
movies that didn't attract such a big audience but still took up shelf space.
Well Netflix's business model depends on massive volume and warehousing, and
it turns out consumers are willing to wait the 2-3 days required for postal
transfer. And since there's no late fees, if there's a movie you really love
you could just keep it out for a month and watch it 20 times until you're sick
of it, whereas previously you'd rent it, go crazy about it, and then buy the
DVD because that was much more economical than keeping it or wasting time at
the video store waiting for it to go back on the shelf so you could rent it
again.

So the problem is _not_ that most movies are crap, because only a very small
number of movies appeal to almost everybody; most people only like a narrow
range of genres and actors and find others uninteresting. Furthermore, we've
only been able to rent videos/DVDs for about a single generation; before that
the only way to see great old movies was in art theaters and on TV. Now you
can fit the 100 greatest movies of all time onto an IPod, goddamn. It's easy
to be sniffy about what's on at the theater when you can hire a comfy chair
for the price of a few lattes and pull a century of movie greats out of your
pocket or laptop bag.

Obviously the answer is 'make something awesome' and people will throw money
at you. But this is quite hard to do. I'm in the middle of making a somewhat
awesome little movie right now (today is a day off) and we're doing it in a
very hacker-ish way with a tiny budget in the 5 figure range. But in the movie
business you can't iterate, you have to commit and ultimately we, the makers,
only have our own feedback and critical skill to judge the project on while
we're making it - so in startup terms, you are stuck with a very high burn
rate, and you have to deliver a lot of (entertainment) functionality in your
first release - you don't get to do a public beta, nor can you make any money
by releasing a fabulous film that's only 5 minutes long. When people want to
watch a movie, they're expecting 80 minutes minimum, and the bare minimum
length of time/money to go from concept to delivery is 6 months and $25,000.
You do hear bout people doing it for less...as part of a marketing campaign.
No matter how passionate you are or how fast you work, writing, editing and
shooting take up time during which you still need food, a place to sleep and a
moderately fast computer. In short, we lie about these things in a desperate
attempt to engage your attention :-)

If you begin with a decent-sized budget, then you can presell into overseas
markets, but to do so you'll need famous names, which generally don't come
cheap.

On any size budget, you also have to invest a lot in marketing (like 50-60% of
said budget for optimal results) so you can open well in theaters, because for
most films, the theatrical release _is not profitable_. You only hear about
the big grossers - and in any case, the bulk of that money stays with the
theater owner. Most films lose money or barely break even at the box office.
The dirty secret of the movie business (for those thinking of getting into it)
is that the theatrical release is just a giant advert for the DVD. You spend
this huge amount of money on marketing in order to establish your film in the
public mind as 'a real movie', and to provide a moment of recognition when
they see your DVD available for rent or purchase - 'oh yeah, I never went to
see that! What the hell, I'll watch it now'. It's incredibly hard to get
people to even rent your film if they've never heard of it or seen an advert
for it.

And all that goes times ten for getting people to _buy_ it, which is where you
have the potential to make some decent profit. If that isn't there, then
investors are less likely to put money into films because the (significantly
high) risk isn't justified by the (comparatively low) rental profits, unless
the film is a relatively sure thing due to the combination of spectacle and
star power - but as people often complain, such films tend toward the bland,
with obvious stories and pg-13 ratings.

I have to say I'm rather with Warner Brothers on this one, and hope the other
studios back them up. Partly because I can see benefits as a film consumer in
studios having a more stable profit model, but also because as an indie
filmmaker, a 28 day DVD sales window at least gives up-and-coming filmmakers a
month to sit on shelves and be seen by consumers, who might later spend money
on renting the film because the title is vaguely familiar from a previous
visit to a store.

Excuse the rambling explanation. I just get irritated by people like this
TechCrunch writer who have no idea wht goes into making and selling a film and
seems to think they pop out of a machine like bubblegum.

~~~
elq
"When Netflix or any other rental business buys DVDs, they don't just buy the
same copy you and I do, but a rental version with different licensing terms
which costs considerably more"

Not true. <http://en.wikipedia.org/wiki/First-sale_doctrine>

~~~
anigbrowl
I love Wikipedia, but surely you've noticed the _[citation needed]_ tag on
this assertion. I strongly dispute the assertions of the Wikipedia editor
about what this case meant.

Here are before-and-after articles about the lawsuit from _Video Business_ ,
the trade publication for the video rental industry:

<http://www.videobusiness.com/article/CA6398859.html>

<http://www.videobusiness.com/article/CA6461951.html?q=nebg>

NEBG, a retailers' association, sought to prevent Genius group, a distributor,
from including an 800 pritned on the front of discs along with the message
'for sale only, call if you suspect piracy', arguaing that including this on
DVDs would damage their members' businesses by implying criminal activity on
their part. The case was dismissed since the labeling never took place, and so
no harm had actually occurred. they were particularly annoyed because an
exclusive rental distribution agreement existed between the distributor and
Blockbuster, such that NEBG members had no way to obtain rental copies to
offer to their customers.

They _assert_ it is legal for them to do so under the first sale doctrine, but
this has never actually been tested in court, so it would be more accurate to
say it has not so far been forbidden. It is _not_ established case law, and in
this sense the Wikipedia article is incorrect.

 _If_ the studeios and distributors establish a 28 day sale window with
Netflix's agreement, and _if_ they make rental copies freely available to
wholesale buyers, then there may well be a test case brought against anyone
who sell consumer copies for rental, brought by both the distributors and very
possibly Netflix themselves.

IANAL, but I am an industry professional, so that's my humble opinion.

~~~
elq
I work for netflix.

I also know that redbox is buying retail dvds
([http://www.latimes.com/business/la-fi-ct-
redbox4-2009dec04,0...](http://www.latimes.com/business/la-fi-ct-
redbox4-2009dec04,0,2713370.story))

netflix used retail dvds for years. AFAIK netflix stil does for certain low
volume titles.

~~~
anigbrowl
Which was fine when the DVD retail window took place after the rental window,
as it did for years. Of course movie studios and distributors like the long
tail but once they've recovered enough of the life time revenues they were
content to let that slide.

Please see the copyright Act s109.b.1.A, which states (in part - software-
specific verbiage removed): _unless authorized by the owners of copyright in
the sound recording ... neither the owner of a particular phonorecord ... may,
for the purposes of direct or indirect commercial advantage, dispose of, or
authorize the disposal of, the possession of that phonorecord ... by rental,
lease, or lending, or by any other act or practice in the nature of rental,
lease, or lending._

[http://www.law.cornell.edu/uscode/17/usc_sec_17_00000109----...](http://www.law.cornell.edu/uscode/17/usc_sec_17_00000109
----000-.html)

I mean look, it's pretty clear that you can not rent audio recordings without
permission (there's an exception for libraries). It's just not allowed. Now if
the film industry's back is against the wall and they either make a case or
lobby Congress to extend the same protection to movies, they can make two
parallel arguments:

1\. it's ridiculous and unfair that you should be able to prevent the rental
of a movie's soundtrack on CD but not have the same control over the movie
itself on DVD; and

2\. while there is an explicit distinction between phonorecordgs and
audiovisual works such as motion pictures (so that it can be argued the above
simply does not apply), there exists a compulsory license for phonorecords -
ie you can license a piece of published music for distribution whether or not
the copyright holder wishes to sell it to you \- hence all those awful
compilation records - but there is no such right for motion pictures, and thus
a distributor of same is perfectly at liberty to refuse to sell to someone,
and impose contractual conditions to that effect, which is the path that
Universal appears to be taking (See s.115 of the copyright act). In short you
don't have an automatic right to be able to obtain a copy.

Incidentally, since you work for Netflix, and I presume your presence here
means you're probably programming for them, the main complaint that I hear
from distributors about Netflix is opacity - they really want better metrics,
of the kind Apple supplies to their content providers. They like the checks
but find it very hard to track the performance of the individual films they
distribute, which in turn frustrates producers.

~~~
elq
I have zero interest in speculating on potential future actions by the movie
studios and distributors. I don't have a working crystal ball.

Yes. I write software for netflix.

Do you honestly believe that Apple has any choice as to how much data they
provide? Do you think apple give detailed metrics because they're warm and
kind business partners?

I'm pretty certain apple provides very detailed data because they sell digital
ownership rights and PPV contracts. Their contracts/agreements with the
distributors would mandate detailed reporting of each sale.

Netflix does not sell digital movie nor do they offer PPV.

~~~
anigbrowl
_I have zero interest in speculating on potential future actions by the movie
studios and distributors._

Fine, but my point about the First Sale Doctrine stands - it is not the
settled legal situation Wikipedia (and thus you) claim it to be, and I've
shown why. You can take or leave my other opinions as you see fit.

 _Do you honestly believe that Apple has any choice as to how much data they
provide? Do you think apple give detailed metrics because they're warm and
kind business partners?_

It's part of their offer, not a matter of compulsion. I'm just pointing out
that distributors would love to have similar information from Netflix, so you
could, you know, make more money by trading it for a small reduction in your
wholesale costs.

