How Hollywood Will Squeeze Netflix

Netflix

It seems the studios have figured out one way to ease the pain of declining DVD revenues: putting the screws to Netflix.

That’s just one of the methods that came out of Blu-Con, an industry conference for the Blu-Ray disc business held Tuesday in Los Angeles. In panel discussions that brought together the top-ranking DVD executives for Warner Bros. (NYSE: TWX), Sony (NYSE: SNE) Pictures, 20th Century Fox, Universal Pictures and Lionsgate (NYSE: LGF), there was clear consensus they were not happy with current deal terms with Netflix (NSDQ: NFLX). Craig Kornblau, president of home entertainment at Universal, indicated they’ll look to extract more from the streaming service upon renegotiation.

“While there are things in the Netflix system that are clearly cannibalistic, there are things we can change,” said Kornblau, as quoted in The Los Angeles Times. “They can pay us more or we can reduce the quality of what we give them.”

The “pay us more” part is fait accompli at this point; Netflix has been giving its checkbook a workout all over Hollywood in recent months and isn’t shy about that. But “reducing the quality” is a shot across the bow given Netflix will likely be in the hunt for bigger and better titles, and in the nicest resolution U.S. broadband can carry.

Though recent stats released by Digital Entertainment Group showed a 14% decrease among standard-definition DVDs in the first three quarters of the year, there was near-unanimity among the DVD deans that the 28-day rental delay imposed on Netflix and Redbox for select titles has kept that number from being even higher. It’s worked so well that Warner Home Video president Ron Sanders said he’ll look to increase the 28-day total, which Home Media Magazine indicated has boosted VOD rentals as well.

“To be honest, 28 days is a little shorter than what we really need, but there will be a chance for this to get looked at again later,” he said.

Not that squeezing Netflix is the only tactic the studios will look to on the DVD front. They were all bullish about more growth coming from Blu-Ray in the coming year, particularly once library titles start to adopt the format. And then there is the much ballyhood “premium VOD” window, which Time Warner chairman Jeff Bewkes tipped his hat to Wednesday in the the conglomerate’s Q3 earnings call.

Netflix wouldn’t address any specific comments made by the studios chiefs, but a spokesman did tell PaidContent on Wednesday, “We’re clearly interested in negotiating with the studio and network partners, but we’ll continue to do that in private.”

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