Netflix declines studios' requests for 'buy' button

Some Hollywood studios have offered to give licensing considerations if Netflix would add a buy button to its site. The answer so far has been no. Could this be a future liability for the service?

Netflix is fixed on movie rentals and isn't interested in selling films anytime soon.

Hollywood is looking for new ways to convince consumers to start collecting movies again. Greg Sandoval

That's what leaders from the Web's top video-rental service have told some of Hollywood's largest film companies, industry insiders told CNET over the past week. In licensing talks with Netflix, execs from the film studios have offered better terms if the video service agreed to add "buy" buttons.

Netflix, which mails DVDs as well as streams video to people who pay monthly subscription fees, has always declined to sell individual movies, the sources said. Managers there have told studio counterparts that they aren't interested in doing transactions. A Netflix representative declined to comment.

Hollywood's home-video market is in transition. People aren't buying and collecting DVDs like they once were and over the past year the momentum has all been with rental.

Netflix's streaming-video rental service, which offers instant access to a growing library of mostly catalog titles, has become an entertainment juggernaut with more than 20 million subscribers. This isn't the best news for the movie business. For the studios a movie rental is typically less profitable than a sale. Asking Netflix to help boost sales was a natural move, especially when other merchants have agreed to sell films as well as rent.

One film industry insider said Amazon's new subscription service became more attractive to the studios after the Internet retailer agreed to give them a crack at generating some transaction money as part of their new streaming-video subscription service.

Amazon announced it would stream any of 5,000 films and TV shows for free to members of the Web store's Prime service. Prime subscribers are customers who pay $79 a year to receive free two-day shipping without being required to meet any minimum-purchase requirements. In addition to offering streaming rentals to prime members, Amazon also has posted a buy button on movie pages.

Could this help Amazon build a better relationship with its video suppliers than Netflix? Conceivably, but Netflix still possesses a far larger following and it's unlikely that anybody competing in the streaming sector could acquire better terms at this point. It's interesting to note that some studio execs said they appreciated the consistency of Netflix's message.

Remember, Hollywood used to enjoy a world in which its different distribution modes were separate from each other in the eyes of the consumer. It used to be that a movie fan walked into Blockbuster and Movie Gallery to rent films, and into Wal-Mart or Best Buy to buy them. Amazon once only sold movies.

Now, Amazon offers streaming rentals while Wal-Mart has moved into rental kiosks. Some of the clarity has been lost and when a consumer is staring at the same movie with two different prices available: say a $4 rental or $15 purchase, sales are likely to decline. One thing to keep in mind though is that new releases at Netflix are primarily available on disc. A buy button could be something that hardcore fans of, say, the "Harry Potter" movies might press.

Nonetheless, Netflix's pages have always featured little else other than movies and TV shows for rent. No ads or sales.

Josh Martin, a video analyst for research group Strategy Analytics, applauded Netflix's decision about buy buttons: "We always have had these silo operations and this one appears to be working," Martin said. "So why would you introduce unnecessary confusion into the equation?"

 

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