Netflix announced Monday that it has entered into a multi-year agreement with Miramax, bringing hundreds of films, including Pulp Fiction and Good Will Hunting, to subscribers of the streaming service.
This deal with Miramax, a major motion picture studio, is the latest in a string of validating deals for the digital movie streaming service. Following deals with CBS, Disney, and Lionsgate, this latest deal adds a valuable (and sizeable) amount of content to Netflix's library and, perhaps more importantly, incredibly boosts legitimacy to the company's infamously pioneering "Freemium" web-based movie rental business model. With already over 100,000 titles for a user base of 14 million subscribers (at a monthly rate of $7.99), the deal gives Netflix, for the time being, a catalog of proven popular older movie titles to increase its stewardship over other movie streaming services like Redbox, Blockbuster, and Hulu.
On the Miramax end of the deal, they benefit just as handsomely. The deal is the first of an anticipated many to make the catalog available digitally to users, exhibiting Miramax's recognition that digitizing its library is too good an opportunity to pass up. In fact, the overall movie industry received approximately $66 million from Netflix in the second quarter of FY2010 alone to acquire the licenses necessary to stream the content. Though a large proportion of this figure came from acquiring licenses to new content, older content, like what Miramax had just licensed to Netflix, was also acquired by Netflix, whose Recommendation functionality in its services assure that it is licensing money well spent (for both Netflix and, of course, the movie studios).
The deal, however, does come at an interesting time both for the overall industry and for Netflix. Netflix is in the process of fully abandoning its service of physical DVD rentals, opting instead for the abovementioned "Freemium" business model. Streaming video increases its profitability, as it can save on 30% COGS for "Fulfillment Services" as well as $700 million per annum in packaging and handling costs. It marks a strategic shift for the company away from being merely a movie rental company to "one of the largest licensors of TV shows and movies" on the market. Netflix is, for all intents and purposes, asserting itself more strongly along the industry value chain in two ways: first by becoming a hybrid, comprehensive industry content manager/distributor and next by removing the hardware requirements necessary to watch movies.
Meanwhile, though some players like Miramax have jumped the "Netflix bandwagon," other larger studios have sought to hold out and to control distribution themselves. Players like Warner Bros and Sony, who have traditionally held lions shares of the film distribution market, are reluctant to give up their positions and to cede both content management and distribution control to Netflix, to which we can extend some empathy. Perplexingly, however, is the way in which they are doing so: entering in delayed release agreements with Netflix so as to stimulate first-month DVD sales of new content. What makes these decisions so odd, however, is the fact that DVD sales are now on the decline and that these agreements hurt the distributive capabilities for the older content in these players' catalogs. And, unfortunately, the rise of Blu-Ray has and is not expected to provide enough support to stop the bleeding from the loss of the DVD.
My recommendation for these studio holdouts? This deal between Netflix and Miramax shows that the "Freemium" and streaming-based business model by Netflix works for itself and for the overall industry, so why be so contentious? In the absence of any productive and logical alternative, these studios should be more openly licensing their content to Netflix.
Article:
http://mashable.com/2011/05/16/miramax-netflix-deal/
This deal with Miramax, a major motion picture studio, is the latest in a string of validating deals for the digital movie streaming service. Following deals with CBS, Disney, and Lionsgate, this latest deal adds a valuable (and sizeable) amount of content to Netflix's library and, perhaps more importantly, incredibly boosts legitimacy to the company's infamously pioneering "Freemium" web-based movie rental business model. With already over 100,000 titles for a user base of 14 million subscribers (at a monthly rate of $7.99), the deal gives Netflix, for the time being, a catalog of proven popular older movie titles to increase its stewardship over other movie streaming services like Redbox, Blockbuster, and Hulu.
On the Miramax end of the deal, they benefit just as handsomely. The deal is the first of an anticipated many to make the catalog available digitally to users, exhibiting Miramax's recognition that digitizing its library is too good an opportunity to pass up. In fact, the overall movie industry received approximately $66 million from Netflix in the second quarter of FY2010 alone to acquire the licenses necessary to stream the content. Though a large proportion of this figure came from acquiring licenses to new content, older content, like what Miramax had just licensed to Netflix, was also acquired by Netflix, whose Recommendation functionality in its services assure that it is licensing money well spent (for both Netflix and, of course, the movie studios).
The deal, however, does come at an interesting time both for the overall industry and for Netflix. Netflix is in the process of fully abandoning its service of physical DVD rentals, opting instead for the abovementioned "Freemium" business model. Streaming video increases its profitability, as it can save on 30% COGS for "Fulfillment Services" as well as $700 million per annum in packaging and handling costs. It marks a strategic shift for the company away from being merely a movie rental company to "one of the largest licensors of TV shows and movies" on the market. Netflix is, for all intents and purposes, asserting itself more strongly along the industry value chain in two ways: first by becoming a hybrid, comprehensive industry content manager/distributor and next by removing the hardware requirements necessary to watch movies.
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Meanwhile, though some players like Miramax have jumped the "Netflix bandwagon," other larger studios have sought to hold out and to control distribution themselves. Players like Warner Bros and Sony, who have traditionally held lions shares of the film distribution market, are reluctant to give up their positions and to cede both content management and distribution control to Netflix, to which we can extend some empathy. Perplexingly, however, is the way in which they are doing so: entering in delayed release agreements with Netflix so as to stimulate first-month DVD sales of new content. What makes these decisions so odd, however, is the fact that DVD sales are now on the decline and that these agreements hurt the distributive capabilities for the older content in these players' catalogs. And, unfortunately, the rise of Blu-Ray has and is not expected to provide enough support to stop the bleeding from the loss of the DVD.
My recommendation for these studio holdouts? This deal between Netflix and Miramax shows that the "Freemium" and streaming-based business model by Netflix works for itself and for the overall industry, so why be so contentious? In the absence of any productive and logical alternative, these studios should be more openly licensing their content to Netflix.
Article:
http://mashable.com/2011/05/16/miramax-netflix-deal/
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