Blog Post

Netflix Agrees To Warner’s New Release Delay In Exchange For More Streaming Rights

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

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.

2 Responses to “Netflix Agrees To Warner’s New Release Delay In Exchange For More Streaming Rights”

  1. This is a win-win-win for netflix, and a ehh for Warner. Netflix can now increase its library, meaning an even more extensive library, something that netflix has always excelled at = win 1. Netflix can build larger streaming library, something that will inevitably draw new users and satisfy old users alike = win 2. And, in exchange they have given a month delay to the release of new movies, which means that rental customers will go elsewhere for their rentals – doesn’t hurt Netflix’s bottomline any, though as they have flat monthly fees, not per rent fees. But that isn’t the magic of it all – the magic is in the fact that netflix now has to buy significantly fewer WB new release titles as they know demand will be much lower, saving them money on the backend = win 3. The customer loses because of this will be negligible, and, in the end, the larger DVD and streaming movie catalog will entice new users to sign up and old users to stay despite release delays, meaning greater customer share and greater profit. Complain all you want, but netflix has nothing to lose with this, and everything to gain. Warner Brothers, on the other hand, really seem to be ass out. They will have more of their titles for rent and instant streaming, meaning less sell-thru on their back catalog, while I can’t see the sales increasing that much because people can’t rent their movies on netflix for a month. They’ll just turn to redbox, blockbuster, hollywood, mom and pop to get their WB fix. Do they really think because people can’t rent it from netflix that they will buy it instead of renting it elsewhere? Maybe a couple, but come on.