Netflix inks deals with Fox, Universal
Service agrees to delay renting new releases for 28 daysSorry Netflix users, no "Avatar" for you -- at least not for the first month after its Earth Day release.
That's because Fox and Universal both struck a deal with Netflix that will give the by-mail DVD service rights to stream more titles, plus cheaper DVDs, the trade-off being it will have to wait 28 days before renting new releases.
That's a coup for Blockbuster and the other bricks-and-mortar video retailers, considering "Avatar" is the biggest blockbuster in film history and sure to be a DVD hit when it streets April 22.
Kiosk operator Redbox also could benefit from a Netflix delay, though probably not as much as one might expect. Fox doesn't allow its distributors to supply Redbox its DVDs until a month after the titles go on sale, so Redbox must purchase them on the open market, so to speak, usually meaning a small delay and fewer discs.
Netflix's new arrangement with Fox and Universal is similar to the one it recently struck with Warner Bros., whereas Blockbuster has been boasting of deals that maintain the status quo: that it can rent movies the day they go on sale.
Although Netflix touts a growth spurt for its streaming titles and the ability to keep costs low because of discounted DVDs from the studios, it nonetheless risks alienating customers who aren't used to having to wait for new releases.
Netflix said, though, that less than 30% of the discs it mails to subscribers are new releases.
A Netflix spokesman said some customers have been "very vocal" about their inability to immediately get "The Blind Side" and "Sherlock Holmes" -- the first two movies under its Warner Bros. arrangement -- but he wouldn't say whether any of the disgruntled subscribers canceled their service.
Investors might get a better sense of that issue when Netflix reports quarterly earnings April 21.
As Netflix and Redbox increasingly become the homes for cheap rentals and Blockbuster becomes the speedier, full-price option, consumers no doubt will be ditching one for another. Wedbush analyst Michael Pachter predicts that Blockbuster could gain up to 10% market share as the scenario unfolds.
"The right question is whether the price-sensitive customer, who already frequents Redbox and Netflix, will modify his or her behavior because they're being asked to wait," Pachter said. "The studios sure hope so and hope that more people buy DVDs."
Some of the streaming titles Netflix has access to now because of its recently rejiggered studio deals include "Patton" and the Fox's TV series "24," "Billy Elliott" from Universal and "Dirty Harry" from Warners.