Netflix Rentals Undermined By Warner Bros. Need For DVD Sales

DVD sales are down, way down, by a whopping 13 percent in 2009, in fact. As consumers curtail their purchases of DVDs, it would seem logical that the DVD rental business -- Netflix's specialty -- would be booming, right?

Wrong. And for a few reasons.

Fortunately, Netflix is a dynamic, self-aware brand. It realized early that DVDs rented via the mail would eventually be replaced by on-demand streaming rentals. So Netflix took steps and positioned itself for the future.

Warner Bros. Studio, however, has other plans, and is crippling Netflix's marketing and distribution strategy at its very source.

The studio has signed a deal with Netflix that dictates the rental brand will not receive any new DVDs until 28 days after the films have been available on the DVD market, and other studios are sure to follow.

The deal means Netflix customers will not have access to new films, and that will certainly have an impact on Netflix's brand. Most people who rent movies on DVD make a decision at some point to "wait until it comes out on DVD." Now, they'll have to wait even longer.

The trade-off for Netflix? Warner Bros. will guarantee more streaming titles for Netflix to offer. Those streaming movies, of course, will not include new releases.

As for the studios like Warner Bros., this strong-arm move to drive more DVD sales may backfire. In reaction to this news, the Facebook group Boycott Buying DVD's for a Month is already up and running.