Netflix (s NFLX) has struck a deal with Warner Bros. (s TWX) 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.