shouting loudly

On Netflix, Hollywood, and media choice

[So I haven't posted in a couple weeks because I've just started an internship at Public Knowledge. Moving, getting set up, etc. But I spent my first day doing business "on the Hill" today. Very enlightening experience, to say the least.]

Itching to post, I thought I’d share a great NYT story about the business models of Netflix v. Hollywood. Hollywood counts on recent, big hits and a few classic, big hits to survive. But Netflix caters to nearly every kind of movie buff. David Leonhardt writes:

Out of the 60,000 titles in Netflix’s inventory, … 35,000 to 40,000 [are rented on any single day]. That’s right: every day, almost two of every three movies ever put onto DVD are rented by a Netflix customer. “Americans’ tastes are really broad,” says Reed Hastings, Netflix’s chief executive. So, while the studios spend their energy promoting bland blockbusters aimed at everyone, Netflix has been catering to what people really want — and helping to keep Hollywood profitable in the process.

The article continues, detailing how exclusive licensing arrangements (e.g., with HBO) keep Hollywood from selling downloads, which ultimately might outstrip a mail-order business model that cannot beat a 2-day turnaround.

But Leonhardt misses two additional relevant factors that will keep Netflix going for years to come. First and most obviously, movie studios are reluctant to sell any movies via download because they’re concerned about finding their stuff on P2P networks the next day. In other words, they still don’t feel confident that their trusted DRM can solve the copyright issue. (Incidentally, this fear is irrational. Anyone can rip DVDs right now without any special equipment, and major movies are already all over the P2P networks. You’d think the studios would want money from some chunk of that traffic.)

Second, a good number of people prefer Netflix and a few days’ turnaround to the video store’s instant gratification for another reason: people make better consumption decisions if they can make them in advance. For instance, if (okay, when) I join Netflix, Citizen Kane will be on my list of films to watch. Why? Because if I pick out 30 movies to watch over the next few months, I’ll pick movies I’ve been meaning to see. But if I have to pick a movie right now, I’m much more likely to wind up with something current because it’s on my mind. Blockbuster may or may not have Citizen Kane, but I wouldn’t know because I’ve never looked.

Watch how people shop at Blockbuster. Most people head straight for the new releases. They want to spend 5-10 minutes picking a movie. (Even more dishearteningly, think about how people watch live TV: “Whatever’s on.”) Then, ask how people pick Netflix rentals. They put a much richer diet on their plates. More foreign films, more classics, more obscure. (Continuing the comparison, think about how much more fun it is to watch all the best shows you’ve TiVo’d and to skip the crap.)

It’s the same deal with food. People generally make MUCH healthier decisions at the grocery store than at restaurants. We make decisions on behalf of “long-term me” that are much healthier than the decisions we make for “me right now.”

Netflix teaches us that choice matters–but not just the volume of choices. Perhaps just as importantly, it’s the ability to make more rational and fulfilling choices over time.