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

Netflix CEO Reed Hastings

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.

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