Streaming on Netflix is great, isn’t it? You can watch all you want for a low flat fee, no worries about waiting for discs, and all it takes is a push of a button. But it’s not Netflix’s content that you’re watching.
Many people don’t seem to care about the lackluster streaming selection Netflix offers, or they wouldn’t be adding new customers almost every quarter. There’s a reason they don’t have that new release content though, and it’s the studios. Netflix has promised to aggressively pursue Warner Brothers content when that contract comes up, but what if Warner says no?
Look at the situation from Warner’s side: Netflix pays a one time fee, or maybe a yearly contract of some sort, to license specific Warner films/TV shows. Warner gets paid sure, but all of sudden Blu-ray and DVD revenue drops because people are happy with just hitting a button from their couch. In place already is The Warner Archive, a selection of exclusive classic films unavailable anywhere else but that website. You can pay to download the movies for $15 or have them printed onto a DVD-R for an added fee ($20). The studio is already making a bid to stream their own content, and per movie, not unlimited. Which is more profitable when the only choice is through the actual studio and not a third-party?
See, unlike physical media where they ship discs out to retailers, let them run promotions, and deal with the bulk of customer issues, streaming doesn’t work like that. You don’t need replication, you don’t need third parties, and Warner sure as hell doesn’t need Netflix. What is the benefit to Warner by signing on with the world’s largest streaming company? Exposure? Who doesn’t know about Inception? What if, instead of waiting for the 28-day delay the studio has imposed on rentals, you could stream it from Warner immediately? What if the Xbox 360 offered Warner content for streaming? Sony’s PlayStation 3 already groups digital movies by studio. It only requires a heftier back-end, the costs of which would be paid for by streaming content individually.
The Netflix advantage is that it is everywhere, and soon there will be a Netflix button included on remote controls. But Netflix is shooting themselves in the foot by transitioning an eager public into streaming, ruining their business model for short term gain. Streaming is bad enough for the consumer in the long run, losing their unlimited options only to be forced into a la carte programming (do you think Fox wants you using bandwidth to stream Avatar 10 times?), they lose what limited rights to the content they already have, all for the sake of convenience. Netflix may be able to ditch the employees who package discs, cutting costs, but they still have to find content to offer.
Netflix is suddenly backed into a corner when Warner leaves and sets up their own shop… then Fox… then Universal… and so on. Suddenly, the Xbox 360 (or next-generation hardware) doesn’t have a Netflix section, but individual ones for the studios, all with the press of a button (and 1200 Microsoft Points). The exodus will not be smooth, and it’s all short-sightedness on the part of country’s largest supplier of digital movie content who don’t seem to have any idea what the future holds.