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Piracy Wins From Netflix Caving to Warner Bros.


Holding new releases for 28 days before rental will lead viewers elsewhere.

Fade in on a barren Netflix (NFLX) queue. Not a title in sight. Ominous strings and baritone woodwinds emerge just below the sound of distant thunder. Then, slow zoom on a Warner Bros. (TWX) DVD as it's placed on a shelf marked "This Just In!" The voice of a gravel-throated narrator is heard.

"Day One: Exposure. Day Three: Word of Mouth. Day Eight: Anticipation. Day 15: Desperation. Day 20: Submissive purchase."

Music abruptly stops.

"Day 28: Buyer's Remorse."


"No matter how much you want to, no matter how much it pains you, no matter how much it kills you, new releases won't be rented until... 28 DAYS LATER!"


Title card and fade out.

In a move that lends itself to a haunting teaser trailer, Netflix has agreed to requests from Warner Bros. to keep the company's DVD and Blu-ray discs from being rented for nearly one full month after their initial release. The studio hopes this measure will urge customers to buy discs rather than rent -- a more profitable scenario for Warner Bros.

The first four weeks of a disc's release mark 75% of the title's sell-through numbers, which is why it's a crucial time for studios to boost lagging DVD sales by any means necessary. In Warner Bros.' case, that means eliminating an option from the most popular online DVD rental house.

In a press release, Netflix's chief content officer Ted Sarandos said, "We've been discussing new approaches with Warner Bros. for some time now and believe we've come up with a creative solution that is a 'win-win' all around."

But that's just two sides. The third side (the customer) has a decidedly "losing" score.

Although the agreement appears to also be a loss for Netflix, the deal also ensures more streamed Warner Bros. titles for Netflix to post on its site. And unlike Blockbuster (BBI) and Redbox (CSTR), Netflix doesn't depend on new release rentals as heavily.

Warner Bros. is hardly the only company lamenting the public's steady shift toward renting discs rather than buying. This deal could set a precedent for other studios to finagle an agreement with Netflix to hold back new rentals -- especially Sony (SNE), which expected the growth in Blu-ray adoption to be much more aggressive than its merely adequate rate. The online retailer could find itself holding hundreds of titles back from public consumption.

However, what all these companies fail to see is the rise in piracy that might occur as a result from this measure. For those who haven't legally purchased a DVD in years and simply rent from Netflix when they're not downloading full-length features from BitTorrent, will they really reconsider and buy a DVD for a single viewing? When most TV shows are available hours after airing -- and movies mere weeks after their theater release -- it's none too likely.

The days that saw the outright need for ownership have come to pass. Viewers lined their shelves with cases and sold single-viewed copies back used to Best Buy (BBY) and Target (TGT) at a heavy loss. DVD ownership may have seemed exciting a few years back -- "You mean I could have the entire second season of Desperate Housewives in my very own home?!" -- but eliminating the rental option won't deter customers from realizing that they just don't need every slightly interesting title the moment it's released.

At best, Warner Bros. and its fellow studios are looking at more people waiting an extra month before renting.
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