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A few weeks ago, we reported on Netflix’s plan to delay Warner Brothers new releases for twenty-eight days. While not exactly convenient for Netflix subscribers, the move was thought to put Netflix in a better position with the studio to receive more physical copies of films, and potentially get more streaming rights as well. Hacking Netflix recently spoke with Netflix Chief Content Officer Ted Sarandos about the deal, who offers some insight into the company’s thought process. He talks about how this move could ultimately help Netflix, and why they offered to implement a delay window before the studios began demanding it.

When asked why they went for a DVD rental window in the first place, Sarandos responds:

The most practical reason is that the savings derived from this deal enable us to be in stock completely on day 29. Remember that we’re a subscription service and the way that you manage the economics of a subscription service is to manage the demand of any disc, depending on the economics of the disc. In the case of the most expensive disc, which in this case is a Warner Bros. disc, purchased through a 3rd party, those discs were out of stock for far longer than 29 days for most Netflix subscribers.

He has a point. I personally never even try to get a Netflix new release until it’s been out for several weeks. Such delays have gotten even worse when it comes to Blu-ray releases. Since Netflix isn’t even really publicizing their artificial delay window to their subscribers, many probably won’t even notice it when compared to the standard wait time for new releases.

Hacking Netflix also reports that the first films to be delayed from this whole deal are The Invention of Lying and Whiteout. Neither film was likely to inspire much demand as new releases, so it remains to be seen how Netflix customers will react to delays with more popular films.

Perhaps the most interesting bit from the interview is why Netflix decided to implement this delay window on their own terms, instead of waiting for the studios bring it up. Says Sarandos:

We brought this to Warner Bros. over a year ago.  The ability to rent a DVD on DVD street date is something that the studios tolerate because it’s a business practice protected by law in the first sale doctrine. Anyone can go to Wal-Mart, buy a DVD, open a video store, and rent it. No studio can stop you from getting content if they don’t like your business model. There’s not much hope that they’re going to reverse that legislation, they’ve have tried to many times over the past 30 years. I went to the studios and said that we know you hate the first sale doctrine, and you’re probably not going to legislate your way out of it, and you can’t impose retailers out of it, so why don’t you incent me to create the window?

While the delay window doesn’t seem like the most consumer-friendly move Netflix could have made, it could also end up being a savvy business decision that ultimately gives Netflix access to more content than before. Much like how their early focus on streaming content has put them in a privileged spot today — now that streaming options are getting cheaper and ever-ubiquitous in the living room — the new release delay could pay off for Netflix in ways we can’t foresee.

Read the rest of the interview over at Hacking Netflix.

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