With the birth of my daughter Emma Kara about a month ago (now you know why I haven’t been blogging :) ), my wife and I decided to sign up again for NetFlix. Since we used to subscribe, we knew the convenience of getting our favorite new releases every Wednesday morning by mail, and now we had more time to watch these movies together since I’m on paternity leave. Great!

The way we manage the queue is pretty simple: on the weekend, we check out what new releases are coming out that week, and add the 2 movies we would like to watch to the queue. So for the first week, we did just that and waited eagerly for the postman to deliver on Wednesday morning. But alas, he didn’t bring any movies! We raced back to our computers to check the queue, and the movies were still there, for sure. We were puzzled for a few minutes and then noticed that the movies were going to be released on this very day… in March! (since this was in February, remember that all the weekdays in March have the same “numbers” as in February) Confused, we double checked the new release lists, and they still showed the movies coming out on that day in February. Seemed like NetFlix had a bug in their system.

We called NetFlix customer service, hoping to correct this little mistake and have our movies delivered to us promptly, but as I overheard my wife on the phone with their customer rep, it became clear to me that nothing seemed wrong, and the customer rep had rapid explanations for everything. Turns out that NetFlix is “experimenting” with a new program with some of the studios to deliver new releases 4 weeks after the release dates. Seems weird? I agree, but it’s ok, we got some explanations.

So the studios are apparently all miserable because DVD sales aren’t doing as well as their Excel spreadsheets indicated, and they’ve pointed their fingers at rentals, especially the new-age boutiques like NetFlix and Redbox. I’m sure they brainstormed all sorts of approaches to this problem, like blocking rentals for some companies or even suing them to make sure customers can’t get their hands on new movie releases. But the solution they’ve stumbled upon is just pure genius: new-age movie rental outlets should delay offering new releases by 4 weeks, in order to boost DVD sales!

Just think about it. I try to add the new movie to my NetFlix queue, and then no movie shows up in my mailbox so what do I do? I run to the nearest Target and buy the movie, of course! Wrong!!! Are they kidding? This is not good for customers (I don’t get my new release), not good for the studios (probably doesn’t increase sales, and could potentially  increase pirating, leading to even lower DVD sales and rentals) and most important of all, damages the long term brand value and customer loyalty of the movie studios (the studios involved so far, afaik, are Universal Pictures, 20th Century Fox, and Warner Bros.)

As if the actions of the studios didn’t piss me off enough, I’m also very annoyed with NetFlix for pretending that they’re doing an experiment with the studios, and that it somehow is good for everyone. Why didn’t the customer rep just tell me that the studios are arm-wrestling them into doing this, and that they would love to send me the movie right away if they only could. That’s one point off for not being up front and honest with me (and already lots of points off for not delivering the movie to me!)

The broader point here is that this is the typical ice harvesters vs refrigerator makers story: the movie studios can’t adapt to a new world, where people get media delivered on a rental basis to their homes, be that via snail mail or the Internet, so they fight change. During time of turbulence, the newcomers usually have to fight some skirmishes like this, and the customers will suffer through the uncertainty, but the long term losers are always those who can’t adapt since change is always inevitable (and good!)

Btw, it seems that this is not just about rentals reducing sales, since Blockbuster and Hollywood Video can still rent out new releases – this just does not make sense at all, and things have to change so that we can move into the 21st century and get proper on-demand, personalized media delivery. The technology to support that has already been around for awhile, so why wait?

- Gummi