Sunday, January 10, 2010

Dancing with a Dinosaur

Last week, Warner Bros. announced a new deal with Netflix under which new releases from the studio will only be available to Netflix subscribers 28 days after they've been released on DVD.  Warner Bros. hopes that by creating this exclusive window more consumers will buy the movie on DVD and Blu-ray and prop up declining home video sales.  By the way, Warner Bros. is not forcing this arrangement on any other distributor, such as Blockbuster, just Netflix. 

Netflix took the deal because in exchange for the 28-day window, Netflix gets greater access to Warner Bros.'s library of films for it's streaming service.  In other words, they're taking the long view.  They get more content that they can offer their customers via the distribution channel that's going to matter the most in the future.  They also probably understand that this arrangement will have next to zero impact on DVD sales and will be merely a minor inconvenience for its customers.  If a new Warner Bros. release isn't available, Netflix customers will simply push the new release further down the queue and watch something else instead, possibly a movie from another studio.   

Netflix has been successful because it is both affordable and convenient.  It's exactly the kind of service that can compete with copyright infringement.  Trying to resuscitate DVD sales is a fool's errand.  As Warner Bros. knows well, customers will still rush out to buy big movies that they want for their home libraries.  But rather than stubbornly cling to old business models, the studios need to embrace changing technology and accept shifting consumer demand.  Today's consumers expect movies to be available in any format they want at a reasonable price.  To their credit, the studios (including Warner Bros.) and some high-tech companies are exploring ways to do that.  But limiting the availability of your product on one of the most popular new home video formats (Netflix has over 11 million subscribers) seems like a step backwards.

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