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Studios could provide new movies later to Netflix and Redbox, earlier to "protected" digital cable

A new proposal from some major movie studios intended to increase sales of DVDs would push back the availability of new DVD releases for Netflix subscribers and Redbox customers.

As a story from the trade journal Video Business explains, the idea is to hold back new releases from these companies for a month -- a proposition Los Gatos, Calif.-based Netflix is prepared to accept in return for a drastic cut in the prices it pays studios for new movies. Adds writer Susanne Ault: "None of the studios has agreed to drop prices as much as Netflix wants."


(Traditional rental shops don't worry the studios that much, Ault writes: "Blockbuster has been left out of the window discussion because it orders more product from the studios than Netflix and Redbox and pays a relatively high price for titles.")

The DVD-kiosk operation Redbox is not so fond of the idea. The Oakbrook Terrace, Ill,, company has instead sued Warner Home Video, Universal Studios Home Entertainment and 20th Century Fox and launched a "Save Low Cost DVDs" Web site to argue for its position.

This isn't the only potential wrinkle to the home-movie market. Under a different proposal, some movies would be offered for rent through cable video-on-demand (VOD) services before their DVD release -- but only to subscribers with digital cable boxes connected via encrypted digital connections to HDTVs. This requirement would block access to viewers with older sets lacking these "protected" inputs.

Because the Federal Communications Commission prohibits "selectable output control," movie studios would have to get a waiver from the FCC first. This Ars Technica piece notes the Motion Picture Association of America's recent lobbying (PDF) for this waiver. The cable industry backs this idea, too; see this blog post by National Cable and Telecommunications Association President Kyle McSlarrow in favor it.

For a brief to the contrary, see Consumer Electronics Association President Gary Shapiro's Huffington Post piece this morning, which notes the history of earlier Hollywood attempts to close the "analog hole" by requiring locked digital connections.

Both the delayed-DVD-rental scheme and this SOC-for-VOD trade-off strike me as foolish ideas for the same reason. Adding yet another "release window" to Hollywood's miserably Balkanized, Byzantine and bureaucratic movie-distribution system can only serve to create more holes in the market for unauthorized downloading to fill. Movie studios won't make anything extra off those viewings, while home viewers will become accustomed to looking outside legitimate channels.

Netflix, Redbox viewers: What's your take on the possibility of a month's delay in the arrival of new releases? Cable subscribers: Would you pay to watch a new release ahead of time on VOD, even if you couldn't watch it on some TVs?

By Rob Pegoraro  |  November 12, 2009; 1:28 PM ET
Categories:  Video  
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No biggie to me.It's the same as waiting until it's out on a premium cable channel. I would imagine ordering VOD to see the movie early would carry a premium price too?

Posted by: tbva | November 12, 2009 1:46 PM | Report abuse

I may not have a business degree or anything, but I thought the point of running a business was to give your customers the product they want, not to force them to buy the product you have...

Posted by: divestoclimb | November 12, 2009 2:15 PM | Report abuse

There are so many movies already out on DVD that I haven't seen yet, and that are stacked up in my NetFlix queue, that if new releases get to NetFlix a month after the DVD release, it wouldn't bother me for most movies.

Posted by: Ghak | November 12, 2009 2:22 PM | Report abuse

The movie studio executives are as dumb as the music studio executives were. This is an absolute invitation for piracy to explode even larger than it is now. Which will happen if they try to deny people the opportunity to view a movie when they want from the vendor they want.

These studios don't get it. The fact is that the market is now in the consumer's hands, not theirs. They need to find a way to exist with that reality just as the music studios had to find a way to exist with Napster and iTunes. If they don't, a large number of people will simply refuse to patronize them. There's very few movies out there that I'll actually buy, or rent for a higher price from Blockbuster or cable. This is especially true if cable tries to tell me what kind of a TV I can view the movie on.

With the movie studio executives trying this effort and certain publishers holding back on the e-book version of some of their books to force people to buy the printed version, music studio executives actually now seem like the most intelligent people in the entertainment business.

Posted by: CJMARTIN04 | November 12, 2009 3:38 PM | Report abuse

With the glut of movies, it seems rather absurd to pirate a movie that you'll have access to just one month later via Netflix or Redbox. If you're so concerned about that extra month delay (there is already a delay), you would already be illegally downloading the movie before its current release date anyway. You're wrong on this hypothesis that piracy will increase, Rob.

However, I do think it's kinda rotten to allow some early release VOD only to digital subscribers with encrypted connections to an HDTV. (Disclosure: I don't think it affects me with fios and my recent hdtv.) Does it matter to them when it would be easier to steal a movie? Pirates, even just the buyers and not the distributors, who want to own won't care when they have to steal something to steal it. So I don't really get this except that it excludes people who for whatever reason haven't upgraded their tvs (e.g., poor people, old people). And given how much effort the FCC gave to allow people to keep their old tvs after the digital conversion, I would think the FCC would not allow this.

Posted by: prokaryote | November 12, 2009 4:35 PM | Report abuse

I agree with Ghak, above. My Netflix queue is usually filled to the limit. Rarely am I so anxious to see a specific movie that I transfer it to the top of the list.

Also, perhaps Netflix will find a way to pass some of the savings along to its customers.

Posted by: Tyelctu | November 12, 2009 4:39 PM | Report abuse

I buy DVD's that come with extra's. I love cool packaging. If the studios want to sell more dvds, they simply have to make the DVD release cool. Add a printed copy of the script. include a prop replica or action figure. Include deleted scenes, outtakes, screen tests, interviews, etc.
Movies are filled with magic, emotion, action, adventure, etc, and the industry is just trying to get us to buy little round plastic disks with a photo on the cover. Great movies are made by great directors, the people who market and sell the dvd's need to have as much creativity and imagination too.

Posted by: MarilynManson | November 13, 2009 11:10 AM | Report abuse

Why should I wait until a movie has left theatres before seeing it at home?

I understand that DirecTV offers limited availability of first-run movies to customers. Why can't we do this with all movies? Give me the choice to see it in a cineplex -- or while sitting on my couch. Keep the price the same as going to the movies. Why doesn't this exist now?

Posted by: terpfan2000 | November 13, 2009 12:04 PM | Report abuse

The DVD will go the way of the VCR. It's so 20th century. The future is all about streaming video. Netflix understands this and according to its CEO, Reed Hastings, wants to be the "ubiquitous" movie source for all streaming platforms (Tivo, Roku, xBox, HDTVs etc.). The company's only limitation is money and by lowering its acquisition costs, it will be able to buy more "instant" content and eventually convert its entire catalog to a streaming format. A month delay, given its future business plan, is insignificant.

Posted by: IndependentVoter100 | November 13, 2009 1:00 PM | Report abuse

New releases for rental businesses always had a huge mark-up. We're talking hundreds of dollars per DVD compared to the 20 bucks or so you eventually pay in the store for your "in home use only" copy.

It seems like an OK deal for Netflix, get your movies from the studios a little later but a lot cheaper. It's not as if Netflix's business model has ever depended having tons of new releases available for everyone who wants one, right? It's always been, fill up your queue, wait in line. People who subscribe to that are probably not that desparate to see a movie right away. I know I'm not. Netflix's customers are defined by their willingness to wait, so why not take advantage of a discount?

But I do have a hard time believing that the slow circulation of new releases through the Netflix system is doing much to DVD sales. As I said, we're not the people typically clamoring to have a movie right away, so a slightly longer wait is probably not going to induce us to go out and buy a bunch of DVDs.

Posted by: Wallenstein | November 13, 2009 5:55 PM | Report abuse

Almost all of my Netflix rentals are new arrivals. That's because they are on Bluray and have been recently reviewed. I own less than 100 DVDs.
Even the free public library has copies of the latest published books for lending. Why Netflix would reduce service to customers and risk losing revenue is a mystery.
Most movies and most books are not worth reading or seeing twice, so why clutter the bookshelf unless you are a collector?
In the case of both you can always rent or borrow it later for an encore.

Some recent rentals were Sunshine Cleaning, Adam Resurrected, and Observe and Report. I would never pay to see these dogs in a theater, and would not even consider a purchase of the DVD. So the losers that paid to produce these should be grateful for any audience at all.

Posted by: george_b_42 | November 16, 2009 7:09 PM | Report abuse

VOD BEFORE the DVD? At a higher price and none of the DVD supplemental materials? If we wanted that, we would just go to the movies.

Posted by: 54Stratocaster | November 18, 2009 1:59 AM | Report abuse

VOD is way over priced and you can only watch it once. What about blu ray owners? I just got a blu ray player and I want to watch as many new movies as possible on blu ray. Netflix and Redbox are awesome. I have to wait an extra month for a new release? Who cares. If I can wait 3 months after it hits theaters to come to DVD and blu ray then I can wait an additional month longer. Lots of older stuff still out there to catch up on. Blockbuster and places like them had their day in the sun charging crazy late fees and all this other garbage. Time to pay the piper.

Posted by: PhilliesPhan | November 19, 2009 5:55 PM | Report abuse

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