Video

This afternoon, Netflix announced that it wouldn’t be shipping new releases from Warner Bros. until 28 days after street date. In exchange for this window, WB is giving better prices and — most crucially — deeper access to its library for Netflix’s streaming service.

The deal makes sense for Warners. Most DVDs are sold in the first month after release, so if they can turn rentals into sales, they come out ahead.

The deal makes sense for Netflix, too. They’re lowering one of their primary costs and getting more content for their Watch Instantly service. To their credit, they understand that the business of mailing DVDs will end. The future is streaming, and they’re increasingly well-positioned.

If you’re a Netflix subscriber who mostly watches new releases, this deal sucks.

Netflix will probably lose some customers in the near term, particularly as other studios cut similar deals. But they may gain more customers with a better streaming library. Netflix has a strange relationship with subscribers: they want to keep them happy but not too happy, since shipping each disc costs real money. My hunch is that the company has crunched the numbers and discovered that the folks who mostly rent new releases end up costing more to support.

If you’re a writer with a movie on home video, this is probably a good deal. You make residuals on DVD sales and streaming, not subscription rentals.

When Netflix ships a disc of Corpse Bride, I get nothing. When Netflix ships those bits over the internet, Warners gets paid, and I get a few cents. That’s good.