Cited: CNet news
Reed Hastings is Netflix management team is celebrating after performing a corporate equivalent of an end zone dance! The only ones begrudging them are those in Hollywood. The direction that Netflix’s CEO has pointed the top video rental store in as Wall Street and subscribers overjoyed. Of course, the only people that are not pleased with the success are those in Hollywood.
Just days before Netflix reported third-quarter earnings that jumped 48% from a year ago and subscriber growth of 28% during the same period, two executives from different studios told me they aren’t getting their fair share.
“The thing with Netflix is that people are taking notice that they keep reporting these big quarters,” said one studio exec. “We aren’t participating in that and that’s going to change.”
Another entertainment executive told me Netflix contributes less to the studios’ bottom line than other distribution modes, such as DVD sales. In addition, Netflix and other digital rental stores, including iTunes, may also be luring customers away from these more profitable outlets. He said that the film industry is just like any other supplier–it wants to see the partners who pay most for its product fare the best.
The problem here, of course, is that Hollywood’s best partners are ailing. DVD sales are in decline. Cable providers are seeing customers drop their subscriptions and turn to the Internet for entertainment. Theater revenues are up but that’s due to rising ticket prices. The more important statistic is the number of moviegoers and that’s shrinking, according to one of the studio execs.
As this Hollywood tearjerker plays out, Hastings and his Netflix crew continue to report knockout earnings. In addition, Apple CEO Steve Jobs is growing iTunes’ video-rental business as well as its download-to-own sales, according to multiple studio sources.
In this environment “there’s a lot of jockeying for position,” said Tom Adams, the principle analyst and founder of Adams Media Research, a company that has provided market data to Hollywood for 25 years. “The studios don’t love the rental market as much because the focus has always been on sales. They’ve had Wal-Mart and Target, stores that are willing to take slim margins for the traffic-generating capability that comes with selling DVDs.”
Look at the situation from the eyes of a studio chief: Netflix charges $9 a month and that enables a subscriber to watch all the movie titles Netflix offers online. Compare that with the money the studios get when a consumer pays $14.95 for a single DVD.
The lords of tinsel town would be wise to keep an eye on Hastings. It was just a couple of years ago that many predicted the company he co-founded in 1997 would be crushed by digital-distribution services.
But Hastings is turning out to be the John Elway of digital entertainment. Like the famed former Denver Broncos quarterback, the Netflix CEO has a knack for executing better than competitors and leading his troops out of jams. Plenty of pundits wrote not long ago that online-video services would eclipse Netflix’s DVD mail-order business–with its profit-chomping warehouses, big postage costs, and inability to provide instant gratification. Customers who rent discs must wait until the mailman arrives to watch a movie.
But Elway engineered “The Drive” and Hastings’ engineered the strategic partnerships with Microsoft’s Xbox, Roku, LG, Sony and other set-top makers that enable Netflix users to watch streaming video on their TV sets.
Under Hastings’ stewardship, Netflix has staked out prime turf. By bridging the so-called “last 10 feet” from the Web to the TV, Netflix promises users a viewing experience that rivals the one provided by traditional cable and broadcast stations. Apple can’t do this (who owns an AppleTV?). Ad-supported Web video services, such as Hulu or YouTube, aren’t hooked up to the TV yet in any important way.
As for Hollywood’s concerns that Netflix is hurting more profitable outlets, there appears to be room for negotiation. Hastings suggested during Netflix’s third-quarter earnings call (PDF) recently that he is willing to share more with the studios once more customers opt for streaming content, which will reduce the costs of shipping DVDs.
“In the long-term, as we license more and more content for streaming and as consumers use streaming more, that enormous and growing postal expense will start to flow to content owners and we will become one of the studios’ and networks’ largest customers,” Hastings said. “The rate of evolution for this depends both on how much streaming content we can license and how many homes have a Netflix-ready device or enjoy watching video on a laptop.”
Hastings appears to be sending Hollywood a message here by saying that Netflix’s streaming service will help turn it into a much more profitable partner, provided the studios give the video store greater access to films and TV shows.
Adams said that Netflix has enjoyed a “grace period” with the studios because the success of Netflix’s steaming service caught many in Hollywood by surprise. (Note: Adams credited Microsoft’s Xbox with fueling much of the speedy growth and said that his research shows Xbox households are watching 17 hours of Netflix streaming content a month, a number he called “significant”). Adams said he thinks a deal will get done that benefits the studios and Netflix. Maybe, but Hollywood has a history of going to war with companies like Netflix when negotiations don’t go its way, according to Hastings.
“Occasionally, a studio tries to find ways to restrict a rental firm’s ability to buy at retail,” Hastings said during the earnings call on Thursday. “But retail is so big and diffuse, this strategy has never worked. Four years ago, Blockbuster, in an attempt to have an exclusive in rental, paid the Weinstein Company to block all purchases of their films by Netflix. This attempted blockade continues today but we’ve never had a problem buying Weinstein DVDs.”
One thing to keep in mind is that the “blockade” he was talking about was for physical discs. Part of the reason why it wasn’t successful is that as long as a video store can find someone to sell it a DVD the law allows them to do pretty much anything it wants with the disc.
This doesn’t apply to streaming movies, however. To distribute films online, Netflix needs to reach an agreement with the studios. The studios could conceivably stifle the growth of Netflix’s streaming business by holding back content. Here’s something else: Hastings said there’s talk the studios may attempt to create a brief “sales-only” period. He didn’t provide many details, but he also didn’t sound too worried.
“If some studios choose to support a sales-only window and delay rental, it would shrink the rental market a bit, but it would grow sales revenue for those studios,” Hastings said. “If we can agree on low enough pricing for delayed rental, it could potentially increase profits for everyone…A short sales-only window would be a benefit to DVD sales and therefore, to the health of the whole DVD ecosystem. Plus, it would allow us to spend less on discs and more on streaming content. ”
This simply means that Hollywood studios may protect DVD sales and at the same time make Netflix even stronger in the rental sector of the industry. Hastings has already shown what he can do when the odds are against it. Do you have any ideas what will happen when he is out in front?
My Take: It is typical of Hollywood! If they are not getting their piece of the pie, they are not happy. You would think they would be happy with the price they charge for movies as it is, but no they are not. I have stopped going to movie theaters because it costs too much. It is a whole lot cheaper to get a movie through Cox with their “On Demand” program.
I know, I have to wait at least a year before get to see the movie, but I still get to see the movie and in luxury of my own home. I am also a subscriber to Netflix because sometimes I want to see a movie that isn’t on cable TV and I do not have the money to buy the DVD. I would be willing to get a movie download if Netflix offered it, but so far they do not. However, there are places online and get the best movie downloads available for price that is usually cheaper than the DVD.
SWAT and Minecraft
In an interesting story to come out of the world of Minecraft, a kid who was mad that the server admin had kicked him off a Minecraft server decided to play a joke on his Minecraft server hosting friend, who was only sixteen years old himself, by calling up the police and getting a SWAT team to invade the server admin’s home as an act of revenge. When a player is banned from a server they can get rather mad and apparently the popular thing to do now is to call up the police and try and get the SWAT team.
New Jim Shore Pieces
Each year there are some amazingly beautiful additions to the Jim Shore series of figurines and collectables and for 2012, there have been some great additions to the collection including an adorable Uncle Scrooge “A Wealth of Riches” figurine which shows Uncle Scrooge in the form of the Scrooge McDuck character from Disney. Another beautiful set includes four lovely and small sea shells that are all unique in their shapes and have a wonderful geometric design painted upon them. In addition there is a beautiful bird that has been added to Jim Shore figurines that is of a Meadow Lark and is called “A Warbling Wonder.”
Complexity of Puzzles
One of the misconceptions about puzzles is the idea that just because a puzzle has a million pieces, it must be difficult, but depending on the specific type of puzzle, sometimes 1000 piece puzzles are such that they are something that would be easy to put together simply because the end result isn’t that complex and does include many different colors. Other puzzles that might have many fewer pieces might be considered very hard simply because of all the similar colors included in the end picture which generally means that it would be harder to decipher where those pieces might go.
Searching for Sun Relief
As anyone knows, it’s important to wear sunglasses when the sun is very bright so as to protect the eyes and while some individuals may employ prescription sunglasses to get their eyes some protection from the sun, it’s often just as easy to get cheap sunglasses to do the job if someone doesn’t otherwise need reading glasses or glasses to see far away outside. Most modern sunglasses today that don’t cost a lot not only offer protection from the sun but also offer some nice style as well since most people want to look cool with their sunglasses on.
Different Club Companies
There are a lot of different options for the clubs that someone might use on the course and in recent years the popularity of golfing has allowed a lot of golf clubs makers to come out of the woodwork and become very popular. Some of the most long standing golf club companies are those such as Titleist and Callaway with other companies such as Odyssey and Mizuno becoming extremely popular as well. The interesting thing about golfing now is that all of a golfer’s clubs might not be coming from the same company as it’s fine to mix and match.
Difficult to Please People
The interesting thing about putting together a wedding is the fact that the woman usually has to take care of most of the details as men often suggest that they don’t care, but interestingly when it comes to rings it ends up that many men will have specific opinions on what they want to wear. One great option is looking into titanium wedding rings as these types of rings are often such that many people haven’t really heard of them before and their designs are very modern and will often match very well with many styles.
Jewelry Offers Significant Sales
There are a lot of economic analysts who have suggested that jewelry sales are likely slated to remain high and that individuals who have been holding onto their old or valuable jewelry might want to visit Atlanta diamond buyers as it would seem that for the time being prices are as high as they’re going to get in the foreseeable future. Jewelry that includes diamonds or gold in it has remained quite expensive for the past several years and the rates have stayed high, much to the confusion of economic analysts who would have thought it would have moved by now.