Netflix subscribers may not be very happy with a pact the rental giant signed Wednesday with Warner Bros.
According to the agreement, the studio's upcoming DVD and Blu-ray releases -- such as the current hits "Sherlock Holmes" and "The Blind Side" -- will have a 28-day delay after the discs go on sale before they are made available to the online rental giant.
For Warner, the benefits of the arrangement are obvious. The studio says in the agreement that the delay will allow it to "maximize the sales potential" for its titles.
In return, the studio will increase the number of Warner movies available for instant streaming on the Netflix site -- including direct-to-video and catalogue films. Netflix also will pay Warner less for the films it streams and for the new releases it rents after the 28-day window has closed.
Netflix insists that it's a win-win deal because 70 percent of its business comes from catalogue titles and video streaming and only 30 percent centers on new releases, according to Ken Ross, a Netflix spokesperson. The company is in discussions with other studios about similar arrangements.
"We differ from other rental companies in that we're not overly reliant on new releases and its that fact that makes this deal work well," Ross told TheWrap. "We've now reduced our product cost from Warner Brothers, and were able to turn those savings into far more units of DVDs and Blu-rays on day 29 and invest in streaming content, which is our highest strategic objective."
The agreement will not impact other movie rental chains such as Blockbuster, who can continue to offer Warner's new releases 28 days in advance of Netflix, a Warner spokesperson confirmed to TheWrap. And Warner already has refused to provide its DVDs to Redbox for 28 days; as a result, the kiosk operator is taking the studio (along with Fox and Universal) to court.
Redbox, however, insists it is still able to provide customers with new Warner releases. Though the kiosk operator is unable to acquire new Warner titles through normal distribution titles, it has developed a work-around strategy that enables it to have new releases from the studio in 70 to 80 percent of its kiosks by the Saturday after they hit the street, Christopher Goodrich, a spokesperson for Redbox, told TheWrap.
Blockbuster, naturally, was ebullient about the news.
"This means that Blockbuster is the only place to rent hot new releases from Warner Brothers, so we're really happy about it.," Michelle Metzger, a spokesperson for Blockbuster, told TheWrap. "We show that people will pay a premium for new releases. Even if the studios eventually switch to a retail only delay, we still stand to benefit, because we do retail in addition to rentals."
“These new agreements build upon the strong relationship we have had with Netflix for nearly 10 years,” Ron Sanders, president of Warner Home Video, said in a statement. “The 28-day window allows us to continue making our most popular films available to Netflix subscribers while supporting our sell-through product.”
"Our customers are desensitized to street dates," Ross said. "They're interested in movies they really love versus ones that came out this week.For other companies this deal wouldn't work, but it does for us."
