Friday, April 09, 2010

Netflix Rental Agreement

Netflix signed a deal today delaying new movie releases from FOX and Universal to its customers by 28 days. On the face of it, this would seem like a bad deal. But actually, it's probably a shrewd move by Netflix.

The movie studios are scared that rental services are taking away their sales of DVD's and Blu-Rays, so they want to delay the rental releases a few weeks in hopes more people will buy again. Typical "old media" thinking. With all the digital distribution coming along with iPads, iPhones, and mobile devices, it's only a matter of time before disc based distribution is obsolete and yet here the major companies are, (WB made a similar agreement last month), more concerned about disc sales than figuring out the reason people don't buy discs anymore. Besides the poor economic times, people are hesitant to invest in more disc based media because there are so many streaming options and so many formats available. Nobody wants to re-buy their media multiple times. Thus, sales are lagging.

I think Netflix realizes this and is willing to take the delays on rental privileges because in exchange they were able to get something even more valuable - access to more streaming content for their user base. Down the line, this is going to be more valuable as mobile devices are even more ubiquitous and they try to push their new iPad and soon to come iPhone app. Good move.

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