- TV Deals Force Studios To Pull Movies From Netflix, iTunes

Tameka Kee
Wednesday, December 10, 2008; 10:07 PM

In weighing the desire to protect their traditional business models against the need to give consumers what they want, when they want it, big entertainment companies have famously tilted toward the former. In the latest example, a number of Hollywood studios have forced Netflix (NSDQ: NFLX) and Apple (NSDQ: AAPL) to remove movies from their download queues because the films are slated to premiere on TV.

CNET explains that the conflict stems from "release windows," or the long-standing agreements between movie studios and the TV industry that dictate the length of time a film can be shown on a particular medium. The cycle typically goes from theater, to DVD, to VOD and pay-per-view (and increasingly alternatives like hotels and airplanes) before finally winding up on broadcast TV. These deals bring in a considerable amount of revenue for the studios?in amounts that dwarf the cut they get from Apple or Netflix?so if the download services are cutting into a TV partner's release window, then it's in the best interest of the studios to take the flicks down.

But that's not exactly serving the consumer?particularly consumers that have dropped TV-based services for downloads?nor is it helping Hollywood prep for operating more effectively in the digital space. Techdirt's Mike Masnick also highlights the hypocrisy of the release window issue: why is it OK for companies like Blockbuster (NYSE: BBI), Netflix, or even local DVD shops to rent physical copies of the film when the DVD is still for sale? It seems that the TV networks are positioning the download services as competing mediums, not merchants; and as long as they control Hollywood's purse strings, then the studios will do the same.

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