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Netflix (NSDQ: NFLX) and Warner Bros. (NYSE: TWX) have reached new content distribution terms — with Netflix agreeing to a 28-day delay on new releases, in exchange for greater access to back catalog and direct-to-video titles for streaming. The companies had been working on the new distribution contract since last August, when Warner Bros. first pushed the idea of imposing a release delay to help “protect” its DVD sales.
Rival Redbox responded with a lawsuit — as we expected — but Netflix execs mostly kept mum. Reports trickled out that CEO Reed Hastings was pushing for a 50 percent discount in exchange for the delay, but that was never confirmed. Still, the wording of the announcement shows that Netflix is getting some kind of price cut: “Netflix benefits from reduced product costs and better availability of new releases.”
Meanwhile, Warner Bros. doesn’t have to worry about Netflix rentals cannibalizing its new release sales, since the company says “75 percent” of its DVD and Blu-ray sales come within the first four weeks of a film’s street date. This is precisely the kind of schmoozing that Netflix Chief Content Officer Ted Sarandos said he’d be doing this year.
Then there’s the streaming. While the deal doesn’t appear to apply to streaming rights for new releases, Netflix does get to beef up its streaming library overall. And with the company aiming to launch an international streaming business in the latter half of this year, having more access to back catalog titles from Warner Bros. — not to mention the other studios — will be a must. Release.