Netflix agrees to 56-day delay on Warner Bros. titles

January 12, 2012 By Geoff Duncan

First it was a 28-day window, but now Warner Bros. and Netflix have agreed to a delay of 56 days until Netflix can offer new Warner Bros. releases.

Back in 2010, Hollywood studios negotiated a major win over DVD-by-mail and Internet streaming service Netflix, getting the company to agree to a 28-day day delay between the retail availability of new titles on Blu-ray and DVD and when they’d be available for rental on Netflix. Now, that window is getting even bigger, with Warner Bros. inking a new deal with Netflix that extends the studio’s retail exclusivity to 56 days—and it’s almost certain other major studios will try to follow suit.

“Netflix wants to ensure members have continued secure access to Warner Bros. DVDs and Blu-ray discs and, as such, is accepting the 56-day holdback,” Netflix’s Vice President of Content Anna Lee said in a terse statement.

The idea behind these delays is to enable the studios to maximize the retail sales of new releases. Historically, consumers who are going to buy their own copy of a newly-released DVD or Blu-ray title are going to do it within the first few weeks of retail availability; after that, retail sales tend to slump. By stretching the window from 28 to 56 days, Warner Bros. is hoping to maximize that retail window for all it’s worth. Adding a larger delay before new releases are available for rental or streaming also maximizes the revenue Warner Bros. can earn from theatrical release and video-on-demand offerings.

The Netflix deal applies to new theatrical releases and made-for-video titles released on DVD and Blu-ray.

However, that’ll only work if it can get other rental companies to toe the line on a 56-day window: so far, Redbox and Blockbuster haven’t signed on, but given that Warner is apparently playing hardball—agree to the 56-day window or lose Warner Bros. movies—it seems only a matter of time before the new window becomes standard for Warner Bros. titles. And once Warner Bros. gets away with it, other studios—like Sony, Universal, Disney— will likely follow suit.

Netflix didn”t have to agree to a 56-day window with Warner Bros. to to continue renting Blu-ray and DVD discs—the company could have chosen to source its discs through third party distributors and offering them for rental to its customers under the First Sale doctrine. (That would enable Netflix to continue offering titles for rental day-and-date with on-disc releases.) However, the agreement with Warner Bros. enables Netflix to purchase discs directly from Warner Bros. at a discount—although the new two-month delay may substantially reduce the value of that discount to Netflix. Moreover, Warner Bros. likely held streaming rights to new releases over Netflix’s head to get the company to agree to the deal—and we all know how badly Netflix wants to be out of the DVD business and operate as a streaming-only company. Netflix may be discovering that, as a middle man, it has very little power in some negotiations.

Showing 2 comments

red777 at 3:48pm 12th January 2012 Hey author -- stop specculating where you know not the fact. Warner "likely held streaming rights to new releases over Netflix’s head to get the company to agree to the deal." Warner has already committed, like most major studios do with various pay cable channels, to exclusive studio output to HBO for the first pay cable window, so there was not anything to "hold over NFLX's head". The reality is that for NFLX to agree to 56, it continues their ecoonmic model in its DVD biz of providing a deep library but NOT necessary on recency -- it had already given up that battle to Blockbuster. By agreeing to the 56-day, it creates leverage against Redbox, which is more dependent upon recency (since it has limited inventory in a kiosk). Either Redbox agrees to the same (it's contract with Warner is supposed to expire at end of january), or it dramatically increase its costs so that $1.20 has to go to $1.75 - $2/rental. Both outcomes are acceptable and lengthens the tail on Netflix's legacy DVD biz. In any case, just IMO.But author's speculation on motivation is not grounded in understanding of hos studios license material.
jesterking at 11:22am 12th January 2012 Another worthless move by Netflix... I thought they were a great company and I love the idea of streaming content instead of renting/buying physical discs. This is the future of home entertainment. Though the entertainment industry is always trying to delay the inevitable because they like their profits. They always end up way behind, and have to play catch up. This is the reason why they are hemorrhaging money. They think in the now, instead of in the future. So go on, delay the release to Netflix. All this will accomplish is more people leaving Netflix, and movie pirating increased as people move away from physical media. going to the movie costs around $30-50 for tow people (popcorn, tickets, soda, etc.). Buying a Bluray disc of a movie can cost, $20-30. The movie industry just doesn't get it... They can not continue this model and expect to make the huge profits their used to. And they wonder why people don't want to go to the movies or why they pirate them instead of buying them. Over priced, low quality films. Another bad move by Netflix. Sad really, I am a huge supporter of Netflix, but they just don't seem to want to make a profit and capitalize on their great product...Sorry, I'll end my rant now! lol/rant