Tweet Netflix: Walking Away from DVD

Stephen Bowie's best-in-class blog (http://classictvhistory.wordpress.com/) recently discussed a Netflix phenomenon I've been noticing. And since he explains it better than I could, here's his take:

Within the last year or two, Netflix has quietly stopped purchasing the majority of new catalog titles that debut on home video.

As of this writing, Netflix still buys most Criterion DVDs, but not necessarily their Blu-rays or the vital box sets on their sub-label Eclipse. Almost every other independent label is shut out, and even the major studios’ catalog releases are often passed over.

Over the last several years, a lot of us stopped buying DVDs, thinking we could always rent them from Netflix instead. That's all changing now.

How can Netflix abandon DVDs when it is, or was, a disc rental business? Because of streaming video. In December, Netflix CEO Reed Hastings said that his management team was devoting 98% of its attention to streaming and only 2% on rental by mail. “Pretty soon, we’re going to be a streaming business that rents some DVDs,” said Hastings.

It's bad enough that Netflix is passing over DVD releases of classic (or at least interesting) movies. It's becoming clear that the company doesn't care much about vintage TV, either:

The most recent DVD releases of The Fugitive, Leave It to Beaver, The Patty Duke Show, The Donna Reed Show, Route 66, and The Lucy Show are all unavailable. The Twilight Zone and recent seasons of C.S.I. are not rentable on Blu-ray, a format for which Netflix has lately developed a particular aversion. Nearly the whole catalog of Timeless Media, presently the most important independent label specializing in television, is unknown to Netflix. That means no Wagon Train, no The Virginian, no Johnny Staccato, no Arrest and Trial, no Soldiers of Fortune, no Coronado 9, and only a stingy helping of Checkmate.

Worst of all, earlier seasons of many popular series – Hawaii Five-O, The Outer Limits, Father Knows Best – have disappeared recently, even though Netflix used to offer them. All of these shows are still in print, so the likelihood is that Netflix has chosen not to replace discs that get lost or damaged. And even though it’s not necessary, it appears that Netflix deletes an entire TV season as soon as just one disc from that set is depleted from its inventory. I suspect that what I’ve noticed is just the tip of the iceberg, and that unless Netflix reverses its policy of not replacing lost discs, we will soon see an epidemic of unavailable classics.

Sure, there's always digital downloads, assuming you've got the bandwidth, but you can't get the extras, the commentary tracks, the liner notes and other things we've taken for granted from DVD releases.

The DVD market has already been knocked to its knees, with sales down 40% industrywide since 2007. That slowdown explains why some video releases have slowed to a crawl (only four seasons of Alfred Hitchcock Presents have been released over the last decade, with six to go), or been snuffed out altogether (only the first season and a half of The Big Valley were issued on DVD, before CBS quietly walked away).

Barring an unexpected and unlikely revival of the DVD business, entertainment from years gone by will soon be available only on a very short-term rental basis, if it's available at all... and that availability can be cut off at any time because of technical or licensing issues, not to mention profitability issues for the content providers.

Virtually all of the movies and programming from the early- and mid-20th Century exist in a narrow market niche. There are only so many of us with any interest in that stuff. Even so, the costs of releasing it on DVD can be recovered when 500 or 1000 of us buy it, because the producing company gets $10-$30 from each of us who do. But when the producer can only get a buck, or a buck-and-a-quarter, from a download... it'll take a whole lot more customers to reach the break-even point. Are there really that many of us? I don't think so.

The golden age of accessibility is fading away before our eyes.

There's ClassicFlix to rent from. Many of my friends swear by it.

ClassicFlix was S L O O O O W

Netflix has many titles now available for instant viewing but not available on DVD. The writing is on the wall.

How much did a two-reel film from Blackhawk cost forty years ago? And you're upset because you're looking at not having everything you want for eight dollars a month -- including the inevitable complaints about them using 8mm prints on the restorations?

I'm glad I ordered those three Eclipse sets from my local shop. Thanks, anyone from Criterion who's reading this -- 1930s Japanese and French films are great.

Mike, I certainly appreciate Nitrateville. It's highly informative and a lot of lively -- if occasionally strident -- banter goes on. However, occasionally the kvetching is on the order of the food being bad, and such small portions.

Bob

I stopped renting over a decade ago but hasn't Netflix been having their lunch handed to them these past few years by the rise of Redbox?

And the reason for the drop off in DVD sales has to do with that little nagging thing we have all been dealing with these past couple of years called the Great 'little' Depression. One day the economy will crawl out of it's self-imposed straitjacket and all of us will become happy, gluttonous consumers all over again.

Now pass the buttered bread and leave me be.

How much did a two-reel film from Blackhawk cost forty years ago? And you're upset because you're looking at not having everything you want for eight dollars a month -- including the inevitable complaints about them using 8mm prints on the restorations?

I'm just pointing out that a sea change is underway. What Netflix is doing now is one sign among many that a business model-- which made a great deal of vintage material available-- is being replaced. There won't be much room for that material in the new model that's emerging.

The golden age of accessibility is fading away before our eyes.

On the other hand, the studios' various on-demand programs (Warner Archive, Screen Classics by Request) have opened up quite a new realm of accessibility. When DVD was first introduced, I assumed that films like Chasing Rainbows and Lord Byron of Broadway would *never, ever* be released---but here they are. Films that were inaccessible outside of film festivals just a few years ago, like The Magician and Mockery, are available too. Vitaphone subjects that were completely forgotten and probably not even preserved 15 years ago can now sit on anyone's shelf. The same goes for those RKO films that had been tied up and almost impossible to see since the 50s--all completely unlikely candidates for home video in 1993 or 2002, and now ownable.

They've become available because of the possibilities inherent in MOD programs--the titles I just mentioned would be pretty non-viable as "normal" releases even under the best of retail circumstances. Library titles that are even deeper would fare no better; MOD programs allow, in principle, the release of everything in a given library that has a usable master and doesn't have underlying issues. No one has to take a bath on thousands of unsold copies or worry about stores not carrying them. In his recent interviews, George Feltenstein has sometimes been deliberately sketchy about future plans for retail DVDs, but he's had nothing but enthusiasm for the Warner Archive line.

It will take some time for the other studios to catch up; Sony has been the most ambitious so far (those clips on their website of Forbidden Trail and No Greater Glory are *beautiful*) but MGM is certainly making its mark--they haven't gone earlier than 1950 so far, but perhaps they'll tackle some Goldwyns. The reports I've heard on Universal's Vault releases have also been positive.

Releasing TV shows to DVD entails more inherent headaches than movies. For one thing--AFAIK--residuals must still be paid to performers (or their estates) per AFTRA agreements with the production companies. (That doesn't apply to older films; SAG renounced residuals for all pre-1948 films in the 1950s and eventually applied that policy to films prior to 1960--correct me if I'm wrong on those points). Music rights can also be expensive to clear and require a lot of legal footwork. That's part of the reason why the Warner Archive has been a little slower in releasing TV series than some fans anticipated. They always note on their Facebook page, in response to queries about TV shows, that researching the rights is a lengthy process.

As much as we like to think that older films appeal primarily to specialised audiences, that's even more the case with older TV shows. It takes a fairly devout fan to spend $100 on the first two seasons of "My Three Sons" (in 4 volumes) with no guarantee that anything else is coming out. Even buying a completed series like "Father Knows Best" will set you back about the same price as the Borzage-Murnau set.

Anyway, all of the foregoing is just my two centimes--disagree at will!

-Harold

I stopped renting over a decade ago but hasn't Netflix been having their lunch handed to them these past few years by the rise of Redbox?

And the reason for the drop off in DVD sales has to do with that little nagging thing we have all been dealing with these past couple of years called the Great 'little' Depression. One day the economy will crawl out of it's self-imposed straitjacket and all of us will become happy, gluttonous consumers all over again.

Now pass the buttered bread and leave me be.

Oh yeah, Netflix is getting their lunch handed to them alright. <sarcasm>

In the 1st Q 2011 their earnings were nearly double what they were in Q1 a year ago. They added 3.6 million subscribers, the biggest growth spurt in their history. Revenues rose 46% to $719M.

True - since they have gone exclusively streaming, but I believe I was referring to the DVD rental business. (not sarcasm....since I rarely know what I am talking about)

There's ClassicFlix to rent from. Many of my friends swear by it.

Thanks, this is the first I heard of them. I just signed up!

To me the worst thing about the whole Netflix/Less-and-eventually-NO-DVD-availability situation is something that I didn't see mentioned in the previous posts (sorry if I missed it!)

Netfilx is largely responsible for the demise of independant DVD stores everywhere. There used to be a couple in Columbus that could be counted on for almost ALL classic DVD releases (one of them had four locations.) All but one of the locations are gone now, weakened by Netflix and given the knockout blow by the economy.

Netflix made lots of folks depend on them and like all good corporate citizens, left them flat when it was no longer its most profitable option.

This is why I always say that it's fine with me if corporations are treated like individuals.

As long as they are treated like sociopathic individuals...

[silentfilm]

My in-laws live in a small rural town in Texas. They have Verizon internet, and had signed up for Netflix streaming, but they are too far from the Verizon central office to be able to stream films. They were very disappointed.

For those who stream Netflix through a Roku box, Roku has many other channels, one of which is "Pub-D-Hub". Pub-D-Hub has a good number of free silent films available via streaming. Their silent catalogue is at
http://www.pubdhub.info/silents.php

This is a anecdotal evidence, so take it for what it's worth, but my Netflix queue hovered for years at about 150 films. Now it is around 85 and the last two dvds I watched were returned over two weeks ago; everything else I've streamed. It seems I am their target market.

Those silent titles are interesting and there are a few Australian silents that I spotted that we can't get here on DVD but they were, I think, on VHS. Of course, we can't get Netflix either.

[silentfilm]

http://www.internetretailer.com/2011/08/23/miramax-and-universal-bring-movie-theater-facebook

Miramax and Universal bring the movie theater to Facebook
Consumers can stream films for 30 Facebook credits, the equivalent of $3.

Movie studios Miramax Films and Universal Pictures have followed the lead of Warner Bros. and Paramount Pictures by making certain films available for consumers to stream on Facebook.

The two new studios have embraced Facebook in different ways. Miramax launched “The Miramax eXperience,” which features 20 movies, including “Pulp Fiction,” “Swingers” and “Shall We Dance?” on both its Facebook page and those of available movies. By comparison, consumers can find and stream “The Big Lebowski,” a cult classic that is the sole film Universal is streaming, only by visiting the movie’s Facebook page.

Both studios charge consumers 30 Facebook Credits, the equivalent of $3 in Facebook’s virtual currency, to stream a film. Consumers can view purchased films for up to 48 hours after hitting play.

“We are big in Facebook and what it could mean for the future of the content business,” read a Miramax blog post. “Today there are over 50 million friends on Facebook that mention a Miramax film in their profile, interact with our Miramax page, or Like the fan pages of beloved Miramax titles and talent.”

In addition to streaming an entire film, the Miramax eXperience enables consumers to view free film clips, play games and share information about films on Facebook. While Miramax launched the application with only a video-on-demand option, it says it plans to eventually allow consumers to buy a film and store it in a web-based digital locker that will be accessible from a range of devices.

Miramax notes that the application remains in beta testing. “I know you don’t hear that word a lot from movie studios,” reads the blog. “Usually we premiere a film after working on it for years, see how it does over a weekend or two and then move on to the next project. Our goal in building this app in just eight short weeks is to emulate what Facebook does better than any company in the world—don’t wait for perfection; launch and then iterate, iterate and iterate again.”

Miramax said it built its application with help from Ooyala and AllDigital. Universal’s application, which was built with vendor Milyoni, allows consumers to Like and share quotes from “The Big Lebowski.” And, to entice consumers to share on Facebook, Universal offers users who rent the film a 10 Facebook Credit discount to 10 friends to rent the movie on the social network.

While the movie studios try to refine their Facebook streaming services, Netflix—which analysts at investment firm Goldman Sachs estimate will end mail distribution of DVDs by 2020 in favor of online streaming—is hardly sitting quietly. The retailer is also working on an integration with Facebook, wrote CEO Reed Hastings in a January letter to investors; Hastings also sits on the Facebook board of directors. “We’re working on an extensive Facebook integration, which will further the notion of a personal Netflix account,” he wrote. “This evolution from household to personal relationship will take several years, and there will always be some households that only have one account.” He did not provide further details.

[silentfilm]

http://money.cnn.com/2011/09/15/technology/netflix/index.htm?hpt=hp_t2

Netflix stock plunges as subscribers quit

By Julianne Pepitone and Aaron Smith @CNNMoneyTech September 15, 2011: 1:16 PM ET

NEW YORK (CNNMoney) -- Netflix subscribers threatened to flee in droves when the company whacked them with a surprise price hike, which kicked in this month.

Now they're making good on that threat. Netflix on Thursday cut its subscriber forecast for the current quarter, saying it now expects to end the period with 24 million customers -- down from the 25 million the company forecast just a few weeks ago.

That's also down from the 25.6 million global subscribers Netflix had on June 30, the end of its second quarter.

Investors punished the stock, sending Netflix (NFLX) shares down more than 16% -- even though the company did not change its earnings or sales guidance.

The writing has been on the wall since July, when Netflix angered many subscribers by saying it would begin charging separate prices for its DVDs-by-mail and streaming video plans. That amounted to a big price hike for Netflix customers, as the cheapest-possible bill for customers who want both services jumped from $10 to $16 a month.

Enraged customers flooded Netflix's site with tens of thousands of comments, as well as a barrage of tweets under the hashtag #DearNetflix.

Angry subscribers aren't good for business, of course, but even more concerning are the reasons for the price hike. Netflix is struggling to build and maintain a robust streaming catalog, but that's getting tougher as studios demand more money and threaten to take their content to Netflix's growing list of rivals.

As a result, customers have been complaining about a smaller selection -- and asking why they're paying more for less. Earlier this month, cable network Starz ended contract renewal negotiations with Netflix and will pull its movies and TV shows from Netflix early next year. It highlights the sometimes contentious relationship that Netflix has with content owners such as Sony (SNE), Walt Disney (DIS, Fortune 500) and Time Warner (TWX, Fortune 500), the parent company of CNNMoney.

Now that streaming video is so popular, providers are upping the price for the content they're licensing to Netflix. One analyst predicts that Netflix's streaming content licensing costs will rise from $180 million in 2010 to a whopping $1.98 billion in 2012.

"There may be a renewed sense of urgency for Netflix to go out to acquire film and TV content to replace Starz," says Anthony DiClemente, Internet and media analyst at Barclays Capital, which owns Netflix stock.

"To keep subscribers, or lure them back, you need offer them value at a good price," DiClemente adds.

Netflix's competitors have become a bargaining chip for studios: If Netflix won't pay studios what they think their content is worth, they'll simply take their business elsewhere.

Beyond direct rivals like Hulu and kiosk service Redbox (owned by Coinstar (CSTR)), big tech players like Amazon (AMZN, Fortune 500) and Google (GOOG, Fortune 500) are jumping into the streaming game. Cable providers including DISH Network (DISH, Fortune 500) are also ramping up streaming, on-demand options.

Despite its growing list of problems, Netflix has been one of the hottest-performing tech stocks of the past few years. Shares are up a staggering 460% since 2008.

DiClemente, the Barclays analyst, is still bullish on Netflix shares. He now predicts that the U.S. subscriber base will recover to 28.8 million by the end of the year -- though that's lower than the 30 million he had projected.

Netflix had been adding subscribers "radically," he says, noting that in recent quarters the company's revenue has been up about 40% to 50% year-over-year -- which gives it a fatter wallet for snapping up new content.

First Published: September 15, 2011: 8:31 AM ET

In an e-mail to customers today, Netflix CEO Reed Hastings informs us that "nearly every movie ever made" is on DVD:

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD, plus lots of TV series. We want to advertise the breadth of our incredible DVD offering so that as many people as possible know it still exists, and it is a great option for those who want the huge and comprehensive selection on DVD. DVD by mail may not last forever, but we want it to last as long as possible.

[silentfilm]

Netflix is all over the business news today.

http://www.cnn.com/2011/09/19/tech/web/netflix-qwikster/index.html?hpt=hp_t2

The apology from the CEO about raising their prices was lame. If he had just explained that the studios wanted a lot more money to stream films, I think that it would have gone over better with their customers.

They really screwed up naming their "new" service, Qwikster, since there is already a "Qwikster" on Twitter, who has a picture of Sesame Street's Elmo smoking a joint. The first Qwikster also uses a lot of profanity, so they seem to have another PR debacle on their hands.

The email did not explain the reason for splitting the company. It is apparently either to sell off the DVD business, or to be able to negotiate separate contracts with movie studios for DVDs and streaming.

I was reading an article on Netflix by this business analyst, and he says that Netflix is really killing themselves. For services that you pay for monthly, whether it is cell phone, electricity, bank accounts, or movies, most customers don't really want to re-evaluate whether or not the service is a good buy unless you force a decision point on them. Then they will shop around and re-evaluate whether or not they were getting their money's worth. Netflix has forced us to re-choose the number of discs and turn on or off streaming in July. Now they will make us keep track of a second queue at Qwikster. Now a lot of customers are deciding to try something else.

In an e-mail to customers today, Netflix CEO Reed Hastings informs us that "nearly every movie ever made" is on DVD:

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD, plus lots of TV series. We want to advertise the breadth of our incredible DVD offering so that as many people as possible know it still exists, and it is a great option for those who want the huge and comprehensive selection on DVD. DVD by mail may not last forever, but we want it to last as long as possible.

Has someone replaced Reed Hastings with a pod?

"Qwikster"?

They should expect a call from a very angry, chocolate milk-drinking rabbit's lawyer.

Ugh, I thought we had moved beyond aping Napster's name...

[silentfilm]

http://www.forbes.com/sites/panosmourdoukoutas/2011/09/19/netflixs-second-strategic-mistake/

Netflix's Second Strategic Mistake

Panos Mourdoukoutas, Contributor

Every student who has taken introductory economics and received a passing grade cannot help but wonder how can Netflix NADAQ:NFLX) commit the one strategic mistake after another, misjudging and miscalculating consumer behavior.

Last month, the company tested the loyalty of its subscribers by raising the price of its video and streaming and mail order bundle. Big mistake, as Netflix has no substantial pricing power. Subscribers fled in droves for competing services. From Amazon.Com (AMZN:NASDAQ), Google (NASDAQ:GOOG) and Wal-Mart (NYSE:WMT) shaving close to 40 percent from its stock price.

Now, Netflix is unbundling its services into two separate services, streaming, and mail order. Big mistake, again, as it erodes further the uniqueness of its offerings, undermining further its pricing power, as it makes easier for subscribers to compare competing offerings for each service. How many subscribers this time Netflix will lose?

It is hard to say. What we can say, however, is that Netflix’s fundamental problem is its business model. Like Amazon.com, the company sells something to the end customers. But unlike Amazon.com, Netflix doesn’t own anything. It doesn’t have any production facilities, any warehouses, just a site where it sells somebody else’s products—content developed by Starz, CBS (NYSE:CBS), and the like.

In the short-run, this may be a highly profitable business. In the long-run, however, profits attract competition; and the company is at the mercy of content providers that have a number of options: They can sell their content directly to the end customers or they can auction it to the highest bidder (streaming-video companies), allowing each to earn what economists call “normal profit,” an average rate of return; CBS’ robust profit report last month confirms this point. This means that Netflix’s stock deserves a PE valuation closer to 15, which is the PE for NASDAQ:QQQ, rather than closer to 38—after the recent correction.

The bottom line: Netflix doesn’t have a sustainable competitive advantage, because it cannot protect its business from competition; and no bargaining power to get favorable prices for video content. And it doesn’t have the pricing power to pass higher cost content to its customers.

Disclosure: Short on NFLX

And Geoffrey Chaucer doth weigh in: A Message From the Pardoner About Synneflix
http://houseoffame.blogspot.com/2011/09 ... eflix.html" target="_blank

"Yt is a soore thynge for me to saye this unto yow aftir many yeeres of yiving esy tradiciounal penaunce wyth pryde, but we thynk it is necessarye and beest: in yet a few weekes, we shal yiven a newe name unto ower tradiciounal penaunce servyse, and we shal clepen yt “Slothster.”

[silentfilm]

http://www.thestreet.com/story/11252521/1/netflix-wont-keep-qwikster-for-long.html?puc=outbrain&cm_ven=outbrain&obref=obnetwork

Some of the comments below this article are actually more interesting than the article itself. Apparently the studios wanted to charge for streaming to all subscribers signed up for Netflix, so that may have been one reason (besides the obvious of selling Qwikster) that they split the companies. Also, Netflix is facing resistance from internet providers because streaming movies take up so much bandwidth.

I'm bumping up this thread because I just re-ordered my Netflix disc queue to put some silent films on top, mostly ones I haven't seen. Then I did some more searching under "Classics...Silent" and noticed something strange which I've just confirmed. Of my top 9 queue films - THE SHOW OFF/THE PLASTIC AGE, A FOOL THERE WAS, MAD LOVE: THE FILMS OF EVGENI BAUER, THE EXTRA GIRL/THE GUSHER, CITY GIRL, HINDLE WAKES, THE OYSTER PRINCESS, LUCKY STAR and THE WINNING OF BARBARA WORTH - not a single one appeared on the browse list, though they are all in my queue as available.
Is Netflix incompetent? Or are they just losing interest?

I guess I will stay with Classic Flix, even if mailing time to California does take awhile!