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Summary:

Netflix has struck a deal with Warner Bros. that will lengthen the wait for subscribers to get new DVD releases, but will add more streaming titles from the studio’s film catalog to Netfix’s “Watch Instantly” streaming service. Under the deal, Warner Bros. will continue make discs […]

Netflix CEO Reed Hastings at NewTeeVee Live

Netflix has struck a deal with Warner Bros. that will lengthen the wait for subscribers to get new DVD releases, but will add more streaming titles from the studio’s film catalog to Netfix’s “Watch Instantly” streaming service. Under the deal, Warner Bros. will continue make discs available directly to Netflix, reducing the cost of procuring its content, in exchange for a 28-day window before those “new releases” are made available to Netflix subscribers. But Netflix also benefits by adding more Warner Bros. content to its streaming library.

Under the new agreement, everyone wins:

Netflix gets more content that will cost it less money to deliver. At NewTeeVee live in November, Netflix CEO Reed Hastings told Om that it costs about $0.05 per title for the company to stream a single film online. On the other hand, Netflix spends about $600 million a year in postage fees delivering DVDs and Blu-ray discs by mail. In addition, the 28-day window, while limiting the amount of new content that is available during the first four weeks of a DVD’s life, has the added bonus of reducing the number of new release discs that will need to be obtained, stored, or shipped. According to the press release, new releases from all suppliers account for about 30 percent of Netflix shipments.

Warner Bros. could increase sales in the four week window. The film studio says that 75 percent of sell-through for its DVDs and Blu-ray discs occurs in the first four weeks that those discs are available. Since new releases will no longer be competing with Netflix rentals during that period, Warner is betting that it will be able to get more consumers to pony up and own the physical disc, rather than just renting it on Netflix.

The deal is just one more example of how Netflix is de-emphasizing DVD-by-mail in lieu of its streaming video service. Last month, the company made the tab for its “Watch Instantly” streaming service the first thing users see when they log on to Netflix.com.

Due to a proliferation of ways users can “Watch Instantly” on the TV — from connected TVs to Blu-Ray players to gaming consoles — the company is seeing quick take-up of that service. According to a recent study, 62 percent of Netflix subscribers have tried out the streaming service, and more than half — 54 percent — stream Netflix titles at least once a month.

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  1. The problem with this 4 week window is that it’s only an inconvenience during the first month of it’s existence. After that, people will simply be 4 weeks behind in their viewing schedule for all WB releases and will simply rent them later. The film industry is fighting a losing battle here and Netflix knows it. So sure, it’s a big win for Netflix but it’s neither good nor bad for WB.

  2. Eagle 96.9 » Netflix Adds Streaming Movies-Delays New Releases Wednesday, January 6, 2010

    [...] It’s good news/bad news with some new changes that they are making with Netflix. If you’re like me, and you like snagging those new releases right away, that’s not going to happen anymore. [...]

  3. The question is – when WB realizes that Netflix subscribers are not the cause of declining DVD sales – rental does not cannibalize retail significantly – will they cop to it? Will they be back to netflix saying: “never mind, we were wrong, just looking for a scapegoat to explain 2009’s P&L”?

    This whole DVD windows thing for Netflix & Redbox is folly. Turning back the clock to a VHS model circa 1984 is more proof that the entertainment industry is stumped, too conservative to figure out a solution.

  4. Warner Bros.-Netflix Deal is All About the Long Tail Friday, January 8, 2010

    [...] “Netflix Stabs Us In The Heart So Hollywood Can Drink Our Blood.” Our own Ryan Lawler on the other hand thought that “everyone wins” under the new agreement. So what is it? The truth is somewhere in [...]

  5. Internet Turns Into Cry Babies Over Netflix Deal With Warner Brothers – SeanPAune.com Saturday, January 9, 2010

    [...] has made many comments over how it plans to focus more heavily on its streaming service as the company spends over $600 million a year in postage as opposed to a streaming film costing them only $.05 in bandwidth costs.  Netflix CEO Reid [...]

  6. Bad News for Netflix: Disney Wants More for Streaming Wall-E Friday, January 15, 2010

    [...] recently had some success negotiating with Warner Bros. recently to add more titles to its streaming service, while giving up a 28-day window for DVD-by-mail rentals of new releases. But while a Netflix [...]

  7. Netflix CEO: Users Don’t Know When DVDs are Released Friday, January 29, 2010

    [...] Netflix first announced that it would delay rentals of Warner Bros. new release titles by four weeks to help the studio increase DVD sales, we argued that the subscription rental firm [...]

  8. Redbox Makes Nice with Warner Bros., Agrees to 28-Day Window Tuesday, February 16, 2010

    [...] DVD rental services in order to protect sales of its new releases. Earlier this year, the studio struck a similar windowing deal with Netflix that will lengthen the wait for Netflix subscribers to get new DVD releases by 28 [...]

  9. Any one else receive WB discs of Late for new rentals that say “Rental” and have a grey cover?

  10. Hollywood Studios Place Bets on On Demand Wednesday, March 17, 2010

    [...] and Warner Bros. have attempted to stem losses in DVD sales by striking deals with Redbox and Netflix to delay the availability of new releases rentals for 28 days. By doing so, they hope that [...]

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