http://online.wsj.com/article/BT-CO-20100106-710531.html
Online DVD rental pioneer Netflix Inc. (NFLX) has reached a new deal with Warner Bros. Home Entertainment that will make new Warner Bros. DVD and Blu-ray titles available for rental 28 days after their release, the companies said Wednesday.
The new agreement addresses the shifting preferences of consumers who appear more reluctant to buy DVDs in a shaky U.S. economy and a wider array of entertainment options.
Terms of the latest deal also cover Warner Bros. titles made available for streaming to Netflix customers. Streaming is an increasingly important part of the company's strategy in the digital age; the number of subscribers who streamed a movie or television episode from Netflix jumped by 20% over the third quarter of last year.
Warner Bros. Home Entertainment, owned by Time Warner Inc. (TWX), announced its intention several months ago to renegotiate terms with Netflix. Time Warner Chief Executive Jeff Bewkes told investors in September that the previous deal's economics didn't "make sense" for the studio.
Most DVD sales come in the first weeks of a title's release. In October, Netflix CEO Reed Hastings said his company would not be opposed to a "sales-only" window of about a month at any studio, as long as Netflix could reach favorable terms.
"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," said Ted Sarandos, chief content officer for Netflix, in a statement.
Ron Sanders, president of Warner Bros. Home Entertainment, said "The 28-day window allows us to continue making our most popular films available to Netflix subscribers while supporting our sell-through product."
The weakened economy and the advent of $1 rentals, most notably from kiosks operated by Coinstar Inc.'s (CSTR) Redbox, have contributed to this trend towards fewer sales and more rentals.
But because the majority of Netflix's shipments to customers are catalog titles, it is less dependent on new releases than its DVD-based competitors. For that reason, the company is perhaps better positioned to adapt to a delayed-rental strategy faster than its rivals - most pointedly, Redbox.
Still, Netflix said Wednesday that its new agreement with Warner Bros. gives it better access to new releases, which currently account for about 30% of its total shipments.
Netflix shares were up 3.2%, at $53.15 in late-afternoon trading Wednesday. Time Warner stock was down marginally, at $29.04.
Sounds very good to me. I could always use more stuff to stream. Me and my wife are absolutely addicted to this stuff.
