Earlier this month, Netflix made a deal with Warner Bros. to delay new DVD releases for 28 days. Over at Hacking Netflix, the CEO of the company goes into some detail on why he approached Warner Bros. to begin with (it was his idea, not theirs), and why he thinks it will work out better for everyone except those customers who signed up expecting all new releases all the time.

The most practical reason is that the savings derived from this deal enable us to be in stock completely on day 29. Remember that we’re a subscription service and the way that you manage the economics of a subscription service is to manage the demand of any disc, depending on the economics of the disc.

In the case of the most expensive disc, which in this case is a Warner Bros. disc, purchased through a 3rd party, those discs were out of stock for far longer than 29 days for most Netflix subscribers. So what were able to is create a deal with them that gave them a little open running room in terms of creating a sell-through window ahead of rental, for us, and hopefully that they’ll find enough value in that it’ll extend to other retailers and other studios will take note and it’ll extend across other studios as well.

The net savings derived from technically creating a better customer experience have been redeployed in additional streaming content for all customers.

“HackingNetflix Interviews Netflix CCO Sarandos about Warner Bros. Deal” [Hacking Netflix] (Thanks to Mike!)

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