We Know Hollywood Is This Dumb. Et Tu, Netflix?

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MG Siegler
TechCrunch.com
Tuesday, November 10, 2009; 12:49 AM

Back in August, we wrote about the Hollywood movie studios conspiring to keep new release DVDs away from services like Netflix and Redbox for as many as 30 days after their release. The idea behind this from Hollywood's perspective is simple: If people can't rent movies right away, they'll buy more. Sorry, did I say the idea was "simple"? I meant, "idiotic".

At the time, it was reported that Blockbuster, the former video giant that is aging anything but gracefully, was also backing this 30-day window idea (where it might see a 30-day rental exclusive on some titles). With the company bleeding money, it shouldn't be surprising that they're aligning themselves with the studios. But more recently, there has been some very disheartening news: Netflix seems to be willing to back this idea too. Yes, the poster child for much of what is right about the consumer movie business these days may be on the verge of making a deal with the devil.

Let's be clear about what this means: If you're a Netflix subscriber, you will no longer be able to rent new movies until 30 days after they've been released on DVD.

The show business trade publication Video Business reported last week that Netflix would be willing to accept this 30-day model for huge discounts on the movies after that period ? perhaps as much as 50%. As a business decision, this would seem to make sense since 70% of Netflix's main business is catalog (older) release rentals. As a long-term strategy, this is just about the dumbest thing I've ever heard.

Here's what this will do: It may drive sales of DVDs a bit short term. But soon, online movie piracy will pick up to new heights. If the movie studios have nightmares about piracy now, their reality will be truly terrifying with this plan in place.

There are two major factors that stop movie piracy from being as bad as music piracy was a few years ago: Broadband speeds and convenience. Let's speak to the latter one first: With services like Netflix, Redbox, iTunes, and the like all offering fairly easy ways to get movies you want, when you want them, it's less of a headache for most people to use them rather than digging around online to get them for free.

But with this new 30-day window in place, the masses would be driven online to search for more illegal content ? and more importantly, it would begin to fuel a piracy ecosystem for Hollywood content. There would be more people downloading, but also more people sharing. That's the key.

Broadband remains an issue in many parts of the country, but increasingly, it's not as big of one as the studios might believe. With devices like the Xbox 360, Apple TV, PS3, and services like Hulu and YouTube, people are getting used to downloading or streaming content over their connections. If you take away the convenience of something like Netflix, these same people will eventually put two and two together that these connections can also be used to get new content online for free, illegally.

Hollywood is making a fatal error with this strategy. In their greed-clouded view, they seem to really believe that most people are renting movies rather than buying them because they're given an option. Kill the option, kill the problem, right?

The truth is that most people are renting movies rather than buying them because the majority of movies released are crap that no one wants to buy. There's a huge difference between paying $3 (or less, with Netflix) to rent a movie that may be entertaining to watch once (or might not be), than having to spend $20 to buy something you don't really want and will have forever.

Hollywood assumes that because they've sort of made this type of buy-first, rent-later environment work on services like iTunes and Xbox Live (where it doesn't really work and is just hampering both services) that it will translate to Netflix as well. But if you give a mouse a cookie, then try to take away that cookie, he's going to bite your hand off.

What's really befuddling is that Netflix lacks the vision to see thorough this BS. They don't seem to realize that longterm it's going to screw them too. While new movies may not be as core to their business as they are to Redbox (which is suing many of the studios to stop something like this), new movies are the sexy lures that bring in new business. If I can't get at those sexy lures for 30 days, they're not nearly as sexy.

The Internet, meanwhile, offers plenty of those sexy lures. Sure, there's some risk in grabbing them, but it's really pretty minimal. Did I mention they're free? Because Hollywood and now Netflix are practically screaming it.

[images: Miramax and New Line Cinemas]


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