Warner Bros. new releases to stay off Netflix for 28 days

Marking the first step in what could be a major change in Hollywood's relationship with Netflix Inc., Warner Bros. has struck a deal with the fast-growing online DVD subscription service that will prevent it from offering new releases until 28 days after they go on sale.

The studio is hoping that the four-week "window" will push consumers interested in watching movies at home to purchase the DVD. Warner already imposes an identical window on $1-per-night kiosk company Redbox and its competitors. Although its unilateral move against Redbox has led to a court battle, Netflix agreed to the 28-day window in exchange for improved financial terms, higher inventory levels and increased access to content for its online streaming service.

As plummeting DVD sales have shrunk the bottom line of studios in recent years, they have focused on Redbox and Netflix, the two fastest-growing segments of the home entertainment market, out of concern that they are drawing consumers away from purchases. Redbox and Netflix rentals generate the smallest profit margins for studios of any home entertainment transaction, and Blu-ray and DVD purchases are the most profitable.

"The 28-day window allows us to continue making our most popular films available to Netflix subscribers while supporting our sell-through product," Warner Home Video President Ron Sanders said in a statement.

"We have been discussing new approaches with Warner Bros. for some time now and believe we've come up with a creative solution that is a 'win-win' all around," said Netflix chief content officer Ted Sarandos, who handles studio relations.

Warner Bros. first said it wanted to change its relationship with Netflix in August, at the same time that it imposed the 28-day window on Redbox and its smaller kiosk competitors.

Other studios have privately expressed similar concerns recently about Netflix, which has more than 11 million subscribers. It's likely that some or all will follow Warner Bros.' lead and strike similar agreements soon. 20th Century Fox and Universal Pictures are the most likely candidates, as they have imposed windows on Redbox.

The new deal means that for the first four weeks after Warner Bros. movies are released on DVD, consumers will be able to only purchase them, download them them through Internet or cable video-on-demand services, or rent them at retail stores like Blockbuster. Video-on-demand and retail rentals are more profitable for studios than Netflix and Redbox, though it remains to be seen whether Warner will look to impose a window on Blockbuster Inc. and its competitors as well.

-- Ben Fritz

Photo: A Netflix consumer with the "Frost/Nixon" DVD. Credit: Paul Sakuma/AP.

Comments

[Harvey]

Makes sense - you want to sell more dvds? Don't make them available to rent. There's already a window between dvd release date and when it is available to HBO, Showtime, et al. I only rent as when I did buy a dvd, I watched it once and then it just gathers dust. Children's dvds are the ticket as parents buy them because rugrats will watch the same thing over and over and over...

[anon]

no big deal, i still won't buy movies that i can rent so cheaply.

[Ct Web Design]

I understand why Warner Bros. is doing this, everyone is trying to shift their business models to compensate for the changing times, but I fear it may backfire on them and only send more potential viewers into watching their movies illegally. Hopefully that isn't the case but only time will tell.

[Netflix User]

In the current economic situation, I decided to subscribe to Netflix to save from having to pay HBO, Showtime, and other movie channels on TV. With this 28 day delay, and as it appears future 28 day delays, that is not going to get me to buy a DVD, that just means that for Netflix users the actual release date will be 28 days later.

[ladyofargonne]

It would have been a good test. But these days by the time you get a new release from NetFlix it HAS been 28 days.

[freezinginalaska]

If you can't rent it from Netflix by mail, the lack of convenience will simply drive more consumers to BitTorrent sites. Not all, but some. Face it, the days of people paying greater than $20 to own a DVD are coming to a screeching halt. Warner Bros is simply delaying the inevitable.

(dons flame-proof asbestos suit) I'm not saying that people should use BitTorrent to steal content...I'm just saying that some will and this move is going to steer more consumers in that direction.

[Egonz]

I don't think this is fair to Netflix subscribers. As is stands, there is already a waiting period for movies which may not be available right away through Netflix, these are usually the new releases that everyone once to watch. What Hollywood needs to do is to make DVDs more affordable so that people will act on impulse and be tempted to buy them. After all, I agree with both previous postings, most of us only see the movie once and gets posted up to collect dust, and yes, hollywood should produced more children's dvds, because children do watch movies...over...and over...and over again.

[Ted]

Isohunt here i come.

[Paleta Fresca]

This will only hurt WB because the revenue they could realize immediately from rentals will now be delayed a month. Dumb move, Warners.

[JM]

This just means that more people will copy the movies they buy from the store and others will illegally download them, if they really want to watch them but not pay. They only loser is Netflix, but I guess they squeezed a few pennies from Warner. The real loser is probably the Netflix consumer.

[Duken4evr]

Smart business decision by Netflix. Instead of filing suit, they negotiated. Good for them. This is a very well run company.

Ya, I own stock in Netflix :)

[Rancho Park]

Bad move. Warners will just push more people to illegally download. You think they would have learn from the music.

[peapod]

..yet more proof that the major studios can't see the phase shift in consumer behavior and are still trying to preserve their historic business models. Netflix, Redbox, youtube, streaming sites, etc are the future of distribution. Pressing DVDs so I can go to best buy/Walmart and pay $15 for a mediocre movie is dying a slow death.

Ignore advances in technology and changes in consumer behavior at your own peril studios and watch your movie revenue go the way of music revenue

[dvdguy]

I think most people will be willing to watch like 20 other movie rentals while they wait for the 1 month to pass. Dumb idea studios. Ain't gonna work out.

[SBJ]

Mr. Sarandos: A "win win all around" for ...? Not your customers.

If I've seen it in a theatre and want it (and that happens more rarely these days), I'll buy it the day it comes out. I do not buy movies unseen, especially not now that I buy nearly everything in Blu-ray. Now I must wait another month to see a movie before deciding if I want to own it? I'll lose interest and may just forget it exists in that amount of time. Oh, well.

I have an enormous DVD and growing Blu-ray collection, btw. Warner just shot itself in its greedy little foot. It's a shame Netflix had to help. Put everything out there! And make it all accessible via my Roku!

[Paul]

Funny how they'll do this but they're still not willing to put an even remotely popular movie for sale on Xbox Live or Playstation Network. Especially when it costs just as much there as for a full DVD with special features at the store.

[Michael Davidson]

This 28 day embargo will limit consumer choice for the sole purpose of enhancing profits. Hey, Warner, why don't you work on improving your Roadrunner service instead of finding new ways to open people's wallets? But, why would you do that? It would just encourage people to drop their bloated cable TV in favor of cost-effective web video services.

Just follow the money.

[Peter Lee]

Yes, it's a deal designed to be a "win-win" for Warner and Netflix. The interest of Netflix's customers are ignored. Are we going to see a price drop for Netflix subscribers? Doubt it. An elimination of the Blu-ray rental surcharge? When pigs fly. Way to make the good ol' brick and mortar Blockbuster more attractive.

[Tony]

The DVD is dead...

Simple...!

[Sludge]

Congratulations, WB. You've just encouraged even more people to illegally download your movies. You dumb, drooling retards.

[Chris]

Do you think redbox users are buying more DVDs because of the 28 day window? Nope.

The studios really need a complete overhaul to the profit model, instead of trying to force people back into the old box they broke out of in the late 90s.

There is simply no good way to lock down content, so might as well unlock it and figure out a way to make that profitable and easy.

It worked with music. Not as many people turn to bitorrent sites for music when you can buy a song for $.50 - $1.00 a song on using a nice UI to do it.

Music is now an impulse buy again. The per song model also helps. When CD's were costing $20 less people could impulsively buy.

Now video has hit the same place, but with a rental model to deal with and even more stream of entertainment to compete with. Removing or delaying the rentals isn't going to help them sell more DVD.

Have you ever seen someone not stop and look at the $5 DVD bin? If they saw something they like, don't you think they would purchase it? I would.

Would I pay $2 to stream it to my TV rather than a $1 for a Redbox rental? I just might. Would I pay $4? Nope.

It is all a matter of pricing. Locking down and restricting content isn't going to make them more money.

[Grandpa]

Does Netflix have any Tom Mix?

[Paul William Tenny]

I wrote a short blog post based on your story Ben, thanks for finding this. I think people are generally right here, all this is going to do is spur piracy. But the bigger deal, if you ask me, is that Netflix service is now degraded, but the prices haven't been reduced.

Fewer or degraded services for the same price is a price *increase*.

I've got no problem with this deal, but Netflix needs to lower the cost of their plans to compensate for the less valuable service.

[Dirk]

I would feel 'some' sympathy for the studios if they didn't gouge the consumer on DVD and Blu-ray prices.

I'll keep using Netflix. I don't 'have' to see a film immediately when it's released on video.

[anonymous]

I am starting to see a trend.

People stopped buying music cds and switched to downloading them online.
Now people have stopped bying dvds and are downloading them online.

I feel like Warner Bros. is blind to the obvious. The internet is how people are getting everything now.