Netflix (Nasdaq: NFLX ) recently announced a new 28-day delay before new Time Warner (NYSE: TWX ) DVDs would make their way into the Netflix library. I sure hope the PR department wore asbestos suits that day.
Angry tirades from disappointed Netflix customers followed just about every article written on the subject. Did Netflix sell out its customers?
In an interview today with enthusiast site Hacking Netflix, the company is telling its side of the story. Chief Content Officer Ted Sarandos explained that a straight-up 28-day wait isn't very different from waiting a few weeks for a hot new release in "long wait" status. Netflix has been buying Time Warner movies on the open market so far, comparing the process to buying DVDs at retail from the local Wal-Mart (NYSE: WMT ) . That tactic produced a short supply of many Warner movies, which then led to lengthy wait times.
So now Netflix gets those movies at a volume discount direct from the studio, and there will be plenty of copies. If you're anxious to get your hands on the next Harry Potter movie (distributed by Warner Bros.), you can still go and buy it yourself, or order one from Amazon.com (Nasdaq: AMZN ) if the online ordering and shipping experience is important to you. Go shake down the closest Redbox machine from Coinstar (Nasdaq: CSTR ) , or gape over the empty shelves at Blockbuster (NYSE: BBI ) .
If the movie was that great, you probably saw it in the theater already. Many Netflix customers – myself included -- don't really mind waiting a little bit longer for guaranteed, easy, cheap delivery of our movie fix. The top spot in my queue right now is held by As It Is in Heaven, a Swedish movie from 2005 that took a while to swim across the Atlantic. Would it ruin my Friday night if I had to settle for my No. 2 choice instead (There Will Be Blood)? Heck, no.
Also, the Time Warner agreement gives Netflix the ability to stream valuable Warner properties like the entire Matrix series, and the cost savings from cheaper DVD purchases go straight into buying more digital licenses from Warner and other movie studios.
All-digital entertainment is the wave of the future, and Netflix is building a solid presence in that future through deals like this one. CEO Reed Hastings should be applauded, then given a medal for Excellence in Forward-Thinking Management. Hold the jeers and rotten tomatoes, please.