Warner CFO "Dissatisfied" With Netflix

[gadgtfreek]

Time Warner CFO: Netflix Not Giving Us The `Right Economics' - WSJ.com

DOW JONES (New York)--Time Warner Inc. (TWX) Chief Financial Officer John Martin said Wednesday that the media giant is dissatisfied with its business coming from Netflix Inc. (NFLX), the online DVD rental service.
At an investor conference in Marina del Rey, Calif., Martin said Netflix was "not an unimportant" distribution channel for Time Warner's film unit, Warner Bros., but "we don't think we're getting enough economics out of this particular channel."
Time Warner said in August that it's seeking new distribution deals with Netflix and Redbox, a chain of low-cost DVD rental kiosks owned by Coinstar Inc. (CSTR). The move comes as the film industry suffers a sharp decline in DVD retail sales - the industry's chief engine of profits - that many view as a permanent trend.
Warner Bros., like several other major film studios, has a revenue-sharing agreement in place with Netflix, but as the company's customer base has grown, the studio has become dissatisfied with its end of the bargain.
Meanwhile, it's seeking to impose a 28-day delay for its new releases rented by Redbox.
Martin said all the various DVD rental channels have a place in the market, but he said from Time Warner's standpoint, the industry has to put them in the right distribution window for the economics to work out.
"You have to imagine that when a consumer enters a store and sees a $1 DVD rental kiosk at the front of the store, you've got strong reason to believe that's damaging the value proposition when we're trying to sell DVDs in the back of the store," said Martin.
"We ought to be able to participate in the right way and get the right economics of our products, as the creators and owners of quality content," he added.

 

[TheForce]

What a verbose line of crap! He could have said all that with one word. GREED

 

[MikeD-C05]

RIGHT ECONOMICS= GREED.

 

[Bobby H]

I disagree about it being greed. Movie studios are businesses. They are not charities required to give away anything for free.

I'd like to see the financial books for Redbox, particularly in how much they're making above the cost of the DVDs and how much is getting bumped over to movie studios in the form of royalties or profit sharing. At $1 per rental it can't be much money at all.

You also have to factor in the problem that lots of video rental customers are total retards when it comes to properly handling discs. DVD rental discs have to be constantly replaced because they are frequently damaged/ruined by customers. That eats into the profit margin, what little there is in a $1 Redbox rental or "all you can eat" rentals from Netflix.

When I rented movies on DVD I had to be at the video store on Tuesday to get a fresh copy of the disc that hadn't already been scuffed up, scratched and finger print smudged by some slob who watched it previously. With Blu-ray rentals I've had better luck so far. But I expect that average of good experiences to seriously decline as Blu-ray changes into a more mainstream video format instead of something exclusively high end.

Ultimately I think traditional video stores and even video rental kiosks like Redbox are doomed. Once average Internet connect speeds across the nation can sustain 10-20 million bit per second bandwidths (or better) we'll see traditional video stores close fast, toppling like dominoes.

Lots of people (including myself) will always prefer movies, games and music on physical media for a variety of valid reasons. But I think the rental model for that stuff will be pushed online-only within 5-10 years if not sooner.

 

[jevans64]

I got out of the CD/DVD/Blu-ray replication business after 14 years because I have been seeing a shift in the way folks get their movies. The studios have been squeezing the replicators into bankruptcy for YEARS and the margin on a DVD was about 8 cents when I left the business in late 2008. Blu-ray was a bit better since the BDA was paying replicators a $3 incentive per disc to cover what the studios DIDN'T want to pay. That went away with the demise of HD-DVD, so I bet the margins suck on those too now. The yields on BD-50 was less than 50% compared to 95% for HD-DVD. Singulus DVD lines made after 2005 only needed a $25,000 upgrade and a software patch to start running HD-DVD at 2 second cycle times while Blu-ray needed entire new lines ( up to $2 million a line for BD-50 ) and ran at 4 seconds ( BD-25 ) or 6 seconds for BD-50.

Blu-ray is a horrible, horrible process for the replicators to get good yields out of.