Earlier this week, Netflix cut a deal with Warner Bros. that will delay the availability of new Warner movies to Netflix subscribers by almost a month but expand the number of older Warner films available for digital streaming.
Whether or not this is good for Netflix subscribers depends entirely on how they use the service.
The deal was a compromise by both sides, according to interviews with Kevin Tsujihara, president of the Warner Bros. Home Entertainment Group, and Reed Hastings, Netflix’s chief executive. Warner, according to Mr. Tsujihara, didn’t want the availability of its films on Netflix to prevent people from paying full price to buy DVDs at retail.
“We wanted to create as much headway as we could for that higher-margin business,” he said.
Warner was willing to give Netflix a lower per-unit price on its discs if the company agreed to delay giving out new releases to subscribers.
Mr. Hastings said that Hollywood studios looked fondly on their businesses in Europe, which has no first-sale doctrine, a provision of American copyright law that allows a disc purchaser (like Netflix) to sell or give away a lawfully purchased copy without permission. As a result, in Europe, the studios can sell DVDs first while they make rental and subscription services wait a few weeks.
He said that Netflix was willing to compromise on the issue because “our number one objective now is expanding the digital catalog.” Netflix’s streaming service won’t receive any newer movies from Warner – “it’s not that much of a breakthrough,” Mr. Hastings said – but it will get a larger piece of the Warner back catalog.
And because Netflix is getting a better price on discs and can therefore buy more, subscribers will soon encounter no wait times when they want to receive the most popular Warner new releases, particularly for high-definition Blu-ray discs.
As for whether or not other major Hollywood studios will follow suit, Mr. Hastings said they were likely to be watching the result of the deal closely.