Warner Enters 56-Day Embargo With Netflix

[rdodolak]

Article from last week's Home Media Magazine. Another nail in the coffin for Netflix's disc based program.

http://www.nxtbook.com/nxtbooks/ques...57c86a7983c#/0

Warner Home Video’s intent on doubling the 28-day delay of new-release titles into rental channels isn’t going to affect Redbox — for now anyway — a spokesperson for the kiosk vendor told Home Media Magazine.

Warner Bros. Home Entertainment Group Jan. 10 formally declared it was implementing a 56-day rental embargo on new-release titles — an announcement made jointly with Netflix, which agreed to the extended retail window. “Netflix wants to ensure members have continued secure access to Warner Bros. DVDs and Bluray discs and, as such, is accepting the 56-day holdback,” said Netflix VP of content Anna Lee.

Universal Studios Home Entertainment’s 28-day delay agreement with Redbox and Netflix is up for renewal in April, and 20th Century Fox Home Entertainment has the right to terminate its agreement as early as April 2013, according to Ralph Schackart, analyst with William Blair & Co. in Chicago. Walt Disney Studios Home Entertainment does not have a window.

Warner has seen a measurable uptick in sellthrough of new-release movies since implementing the 28-day window for subscription and kiosk vendors in 2010, said Mark Horak, president of Warner Home Video North America. “One of the key initiatives for Warner is to improve the value of ownership for the consumer, and the extension of the rental window — along with our support of UltraViolet — is an important piece of that strategy.”

A studio source familiar with the deal said the initial embargo extension affected just Netflix and that discussions with other rental vendors were ongoing.

No. 1 kiosk vendor Redbox’s license agreement with Warner, which calls for a 28-day embargo, expires at the end of the month. Redbox spokesperson Kate Brennan said in an email the current agreement that parent Coinstar has with Warner is to receive movie titles 28-days after their release.

“No revised agreements are in place,” read the official Coinstar statement.

Eric Wold, analyst with B. Riley & Co. in Los Angeles, said Netflix was wise to take the extension in exchange for lower-priced disc rentals, but he expects Redbox to reject the window.

He said Redbox, which operates more than 40,000 kiosks in 27,000 locations, is heavily invested in offering new releases near street date — a business strategy it could not afford to change going forward. Wold expects Redbox — if confronted with an extended embargo — to push through a workaround program obtaining Warner titles through alternative sources, including big-box retail.

The analyst said Redbox has spent the past two years perfecting just such a strategy and is better prepared to implement it than it was two years ago when confronted by studio embargoes for the first time.

“We continue to expect Coinstar to … implement a long-term replacement workaround strategy,” Wold wrote in a Jan. 11 note. “In our opinion, this remains the smarter move for the company.”

Russ Crupnick, senior industry analyst with The NPD Group, wonders whether studio attempts to manufacture scarcity of new product through windowing matters any more to consumers in today’s movie retail environment.

Crupnick said NPD research indicates that more than 90% of renters would not consider acquiring a title through alternative channels, i.e. sellthrough.

“The challenge is that the extended window will likely help only a select number of titles, and extending the window may actually hurt some fringe releases,” Crupnick wrote in a blog. “Consumers will simply rent them later on, or maybe not at all.”

At the same time, if the extended windows increase sellthrough at higher margins of just 3%, it’s an incremental win for studios, the analyst said.

He said effectiveness of “appointment” viewing of movies is diminishing with the rise in lowercost VOD options and DVR use. Crupnick wondered when a “Triple-A” title isn’t available for rent on street date, will consumers simply switch to time-shifted TV content or streamed episodes of “Breaking Bad” on Netflix?

[ZoetMB]

People will scream at this, but if you don' t protect markets, they'll disappear. Already, the short windows before DVD/BDs are released is killing theatres and the the short window to rental is killing purchase.

So in the long run, we'll all be better off.

Considering how few weeks most films stay in theatres these days anyway, even with a 56 day embargo window, we still have films available for rental long before they used to be anyway, because most films stayed in theatres for at least two months.

[Trekkie313]

Why isn't this affecting the shitty Redbox?

[octagon]

So I have to wait four more weeks to rent a new movie for a dollar or two?

That's outrageous, I'll just steal it instead.

Or not, I dunno.

[octagon]

Originally Posted by ZoetMB

People will scream at this, but if you don' t protect markets, they'll disappear. Already, the short windows before DVD/BDs are released is killing theatres and the the short window to rental is killing purchase.

So in the long run, we'll all be better off.

Considering how few weeks most films stay in theatres these days anyway, even with a 56 day embargo window, we still have films available for rental long before they used to be anyway, because most films stayed in theatres for at least two months.

Which is even funnier when you consider all the carping about studio output. You can't turn around without tripping over threads declaring Hollywood is officially out of ideas and yet making us wait a few more weeks to rent their 'recycled crap' is an unconscionable burden.

[octagon]

Originally Posted by Trekkie313

Why isn't this affecting the shitty Redbox?

They've decided the smarter move for them is to buy copies at Amazon or Walmart if they have to. That may or may not be sustainable and they may or may not be able to work out some other deal with studios like Warner but they're of the opinion (and rightly, I think) that the short window is make or break for them.

[rdodolak]

Originally Posted by octagon

They've decided the smarter move for them is to buy copies at Amazon or Walmart if they have to. That may or may not be sustainable and they may or may not be able to work out some other deal with studios like Warner but they're of the opinion (and rightly, I think) that the short window is make or break for them.

Blockbuster also refused to give in to the studio (WB in particular) demands and they were also purchasing retail copies for rental. It was Netflix who first suggested the original 28-day delay for new releases years ago. Eventually WB and the other studios bit a couple of years ago hence this whole mess lies with Netflix.

[blu2]

The studios seem intent on handicapping the physical rental market.

But I think either people will just adapt to the extra delay, or use other options.

[BStecke]

Originally Posted by octagon

So I have to wait four more weeks to rent a new movie for a dollar or two?

That's outrageous, I'll just steal it instead.

Or not, I dunno.

In reality, this is what's going to continue to happen anyway. The movie and music industry seems stuck in the mindset of attempting to force consumers into playing the same game that's been around for years, when the game has changed. Personally I don't download movies because I want to watch them in high quality without the hassle of burning discs and such. But making me wait isn't going to make me buy a movie I would normally rent. It would just irritate me.

I'm just glad I still have a Blockbuster in my area. None of this affects me.

[krazeyeyez]

I was under the impression it was illegal to rent store bought copies, so how are these companies able to do it?

[OrlandoEastwood]

Originally Posted by krazeyeyez

I was under the impression it was illegal to rent store bought copies, so how are these companies able to do it?

There's a work around with it, I forget exactly, but there's a rule. Also, it can be used as a Tax Write off.

[blu2]

Originally Posted by krazeyeyez

I was under the impression it was illegal to rent store bought copies, so how are these companies able to do it?

It's the "First Sale Doctrine" that allows it.

http://en.wikipedia.org/wiki/First-sale_doctrine

[wp34gsh]

When Netflix first agreed to the 28 day window, one of the spins they put on it was that it would allow for more steaming content, im sure there was some increase, but nothing that really made go wow this was worth it,

but the one thin gi didnt see in this article is what netflix gets out of the new agreement? do we again get more streaming titles, or does netflix get lower cost then to by these movies and push the savings towards us, yeah right, so whats the deal, does anyone know, or does WB and netflix find it so easy to screw there customers that they dont even care about give and take anymore

[ZoetMB]

Originally Posted by Trekkie313

Why isn't this affecting the shitty Redbox?

It is, but Redbox maintains that they'll simply purchase copies and use them for rental anyway. Except I don't know how they can get away with that because when they purchase regular "for sale" versions, whether at wholesale or retail, those are clearly not licensed for rentals and I think Redbox would easily lose a court battle over this. (Unless I'm missing something.)

There's a post above that claims the "First Sale Doctrine" permits this, but I'm not sure if that applies to commercial enterprises, like Redbox. But maybe it does.

[blu2]

Originally Posted by ZoetMB

It is, but Redbox maintains that they'll simply purchase copies and use them for rental anyway. Except I don't know how they can get away with that because when they purchase regular "for sale" versions, whether at wholesale or retail, those are clearly not licensed for rentals and I think Redbox would easily lose a court battle over this. (Unless I'm missing something.)

There's a post above that claims the "First Sale Doctrine" permits this, but I'm not sure if that applies to commercial enterprises, like Redbox. But maybe it does.

The First Sale Doctrine applies to commercial enterprises as well.

Lots of articles out there discuss this.

http://www.hollywoodreporter.com/new...iscount-278770

[krazeyeyez]

Why on earth have all these places not done this to begin with in terms of exclusives, wait windows etc... not to mention i know rental stores used to pay a pretty high premium back in the vhs days for the ability to have their rentable copy.

Also how does this first sale doctrine negate the fbi warnings etc... at the beginning of every film? Weird.

[Anthony P]

Originally Posted by krazeyeyez

Why on earth have all these places not done this to begin with in terms of exclusives, wait windows etc.

Profitability, they get a better deal and profit sharing if they deal with the studio instead of retail copies.

Also how does this first sale doctrine negate the fbi warnings etc... at the beginning of every film? Weird.

It does not, where does the FBI warning state that you can’t lend the movie out for private use (if you charge for it)? You can’t make copies without the permission of the CR owner and a rental place does not. It also states that iot is for private use and a rental copies is exactly that rented for private use, if you want a public use (public use is any public location like a school, churches, office, park.....) or broadcast copy you need to get it elsewhere.

.. not to mention i know rental stores used to pay a pretty high premium back in the vhs days for the ability to have their rentable copy.

Used to, there was a time when studios only sold expensive VHS copies to rental places, but once retail copies became more abundant rental copies disappeared, what happened next was that Blockbuster and the studios created a profit sharing scheme (instead of paying retail or whole sale the rental place pays a lower price but accepts to pay the studio for every rental – I don’t know the actual prices but let’s say as an example instead of 20$ they pays 5$ per tape + 1$ per rental) This was good for the chain (they could afford to get more copies and so Joe said “why go to the mom & pop that has 3 copies that will be impossible to get instead of BB that will have 10 copies) and the studio (the film has more visibility while at the same time if it is popular you can make more money). The issue is that over time the prices in such deals have eroded (if Netflix can send 8 films in a month for 10$ and Redbox can rent them for 1$ obviously it is not 1$ a rental that goes to the studio). That is why studios have pushed for these stuff. The person that wants it badly enough to buy it, they can pay retail while the person that wants to save money can rent it (but the studio makes much less)


PS this is not only for disks, but also (and worst) for DL since the first doctrine does not apply (i.e. Netflix can go and buy a BD of a film from anywhere, but they can't go a digital distribution license)

PPS I don’t know f there is a theatrical licence but there is at least broadcast, public viewing and private viewing and all of those have to do with how it is used. Blu-rays like the one you get from Netflix, BB, RB or the retail store have private viewing rights, it would be illegal for anyone to show a private viewing copy on TV or in a school room or in a park.......

[lobosrul]

Originally Posted by Anthony P

PPS I don’t know f there is a theatrical licence but there is at least broadcast, public viewing and private viewing and all of those have to do with how it is used. Blu-rays like the one you get from Netflix, BB, RB or the retail store have private viewing rights, it would be illegal for anyone to show a private viewing copy on TV or in a school room or in a park.......

That's not true (for the school room), if the following conditions are met:

A teacher or instructor is present
The showing takes place in a classroom setting with only the enrolled students attending
The movie is used as an essential part of the core, required curriculum being taught. (The instructor should be able to show how the use of the motion picture contributes to the overall required course study and syllabus.)
The movie being used is a legitimate copy, not taped from a legitimate copy or taped from TV

Source: http://www.movlic.com/k12/faq.html#4

[Anthony P]

Originally Posted by lobosrul

That's not true (for the school room), if the following conditions are met:

A teacher or instructor is present
The showing takes place in a classroom setting with only the enrolled students attending
The movie is used as an essential part of the core, required curriculum being taught. (The instructor should be able to show how the use of the motion picture contributes to the overall required course study and syllabus.)
The movie being used is a legitimate copy, not taped from a legitimate copy or taped from TV

Source: http://www.movlic.com/k12/faq.html#4

valide point, I meant it more generally, usually when people talk about showing movies at school on forums like this they don't mean as part of the teaching material.

[wjasoncul]

Looks like this is active now. Rock of Ages shows available Dec 2012 in my Netflix rental queue