Is Netflix's Service About to Get Even Worse?
If Netflix (NAS: NFLX) wants to kill its DVD-rental operations, the company just got some help getting it done. Or so it would seem.
Time Warner (NYS: TWX) says that the old 28-day delays before shipping new DVD releases to Coinstar's (NAS: CSTR) Redbox and to Netflix are very likely going away. The original deals expire at the end of the year -- and Warner liked 'em so much, the company wants an even longer pause in their place. Gotta protect those lucrative direct-to-consumer DVD sales, you know.
This revelation comes as the throwaway ending to a Financial Times interview with Warner Bros. Home Entertainment president Kevin Tsujihara, whom I've always seen as a light in Hollywood's Luddite darkness. The main gist of that story is that Warner wanted a similar release window for DISH Network's (NAS: DISH) acquired Blockbuster stores, but DISH saw immediate availability as a strong selling point and flatly refused. So instead of getting Warner discs on favorable purchase or lease terms straight from the source, Blockbuster now goes to retail stores or perhaps middleman distributors to get its early-release Warner fix.
Netflix sort of started out that way and could get back in the quick-release game by going there again. Remember the first-sale doctrine!
But like I said, I respect Tsujihara and fully expect a deal that lets both sides get something they want. In one embodiment, Netflix could agree to a longer new-release DVD delay in return for more palatable terms on streaming content licenses. In another embodiment, the payback for longer delays could be prominent Netflix-branded product placement in Warner's movies and TV shows. Another embodiment would encompass slower but cheaper DVD shipments -- or deeper digital access to Warner's enormous back catalog of great content, or homemade tiramisu and professional backrubs at the next Netflix personnel party on Warner's dime. Maybe even some kind of tie-in to Warner property HBO. That would be sweet.
You get the idea -- Netflix may very well sign a seemingly less attractive DVD deal with Warner -- and then with Sony (NYS: SNE) , and Walt Disney (NYS: DIS) , and whatever other company thinks this is a good idea -- but will demand something substantial in return.
With any other studio on the other side of the table, I'd expect heavy friction and maybe no deal at all. Thanks to Tsujihara's involvement, I believe we'll see something better. And then it'll be up to Reed Hastings to explain what we get on balance for slower DVD releases -- without putting his foot in his mouth.
Is that too much to ask? Fool CEO Tom Gardner certainly wants better communication out of Hastings. Will we get it? Only time will tell. Add Netflix to your Foolish watchlist, so you can see if Hastings can deliver.
At the time this article was published Fool contributorAnders Bylundowns shares of Netflix but holds no other position in any of the companies mentioned. We would like to apologize for the section that reads like a patent filing. The people responsible have been sacked and replaced by a local llama herder.Motley Fool newsletter serviceshave recommended buying shares of Netflix, Coinstar, and Walt Disney. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. Ourdisclosure policyreally likes llamas.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.