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Are DVDs Inconvenient On Purpose? 490

Posted by Soulskill
from the couldn't-have-been-an-accident dept.
Slashdot contributor Bennett Haselton writes: "Why do Netflix and a few other companies keep the DVD format alive, when streaming is more convenient for almost all users? The answer is not obvious, but my best theory is that it has to do with what economists call price discrimination. Netflix is still the cheapest legal way to watch a dozen recent releases every month — but only if you're willing to put up with those clunky DVDs." Read on for the rest of Bennett's thoughts.

I was noodling around Best Buy looking for a new laptop, and it occurred to me how inconvenient it was that I was limiting myself to models with DVD players. Either that, or thinking what a pain it would be having to take an external DVD player everywhere that I might want to watch a movie on my laptop. Then I started to wonder why this was.

Specifically: Why do movie studios allow Netflix to send out DVDs to their subscribers by mail, but not to allow the same option in the form of "virtual DVDs" that you could "check out" through their website, and stream them while they're checked out to you? Surely the streaming option is more convenient for almost everybody — no postage fees, no opening and sealing of envelopes on Netflix's end, no dealing with lost and scratched DVDs, etc.

Well, obviously movie studios would not allow Netflix to let users "check out" a virtual DVD, stream it, and then "return" it and instantly "check out" the next virtual DVD in their queue, since this effectively amounts to unlimited simultaneous access to all of their titles. (That's now Netflix's huge online streaming library works, but movie studios don't currently want to make all of their movies available for instant streaming.)

But then why not take all the movies that are currently only available as DVDs (not for streaming), make them available as "virtual DVDs", and only allow users to check out a certain number per month? This would mimic the limit imposed by the speed of the postal service, which only allows users to check out a fixed number of movies per month by mail. Netflix could keep its existing streaming library the way it is, and for the movies currently available only as physical rental DVDs, replace them with "virtual DVDs" that would count towards a user's monthly virtual DVD limit. Why won't movie studios let them do that?

Well actually, there's still a clear reason why movie studios would not allow this: a certain amount of revenue comes from impulse buys from users who decide that they want to watch The Dark Knight Rises right now and rent it from Google Play. (That's how I broke in my setup for holding a tablet in front of an elliptical while exercising, and worked out for the entire length of the movie to assuage my guilt from pigging out at a party.) If Netflix allowed instant checkout of virtual DVDs, the studio would lose the $5 or more that it makes when a user decides to rent a recently released blockbuster. (The studio would still get a cut of the money the user pays to Netflix for the virtual DVD plan, but not as much -- about $12 per month divided by about 12 DVDs.)

So, finally, suppose Netflix built this limitation into the virtual DVD plan as well — you could have a "virtual DVD" queue, with two or three virtual DVDs "checked out" at any one time, and every time you "returned" a virtual DVD, there would be a delay of 24 hours or more before the next DVD in the queue would be "checked out" to you. So the virtual DVD queue would essentially mimic Netflix's existing experience of renting DVDs by mail, except the content would be streamed, so you could watch it on any device with an Internet connection.

Now we have a fairly interesting question. If what I've described would be essentially "the same thing" as Netflix's existing DVD plan — except replacing physical DVDs with streaming, which would be more convenient for all parties involved — then why won't movie studios allow them to do that? Of course movie studios don't want their own DVD sales being undermined, but they already allow Netflix to "compete" with the studios own DVD sales by offering physical DVDs for rent, so why wouldn't they allow them to offer virtual DVDs for rent in exactly the same way?

I'm interested in questions like these which seem to have an obvious answer, but the obvious answer is a decoy which turns out to be wrong, and the real answer is necessarily more complicated. In this case, the obvious answer is that studios don't allow Netflix users to check out "virtual streaming DVDs" because it would compete with their own DVD sales. But that answer by itself can't be right, because studios do allow Netflix users to check out physical DVDs, which also compete with the studio's own DVD sales. So what could be their reason for allowing users to check out physical DVDs but not to "check out" virtual DVDs in exactly the same way, where studios would get the exact same cut of the rental rates as if they were real physical DVDs being checked out?

Unfortunately, by the very nature of these decoy-answer-making-a-deeper-mystery questions, if you ask them in a forum or on a mailing list, you'll get people spelling out the decoy answer for you with what they imagine to be the patience of someone talking to an idiot. Wherever I posed this question, I got the answer that studios wouldn't allow virtual DVD checkouts because it would undermine their own DVD sales. To repeat, the question is why the studios allow physical DVD check-outs from a service like Netflix but do not allow virtual DVD check-outs that would otherwise work in exactly the same way, with Netflix and the studios getting paid the same in each case.

One possible answer is that this is a form of price discrimination, whereby a seller tries to extract the most that different market segments will pay for essentially the same product. Student discounts for museum admission are a form of price discrimination — extracting more money from non-student adults who have more disposable income, while still gaining some revenue from poorer students who otherwise would have skipped the experience and paid nothing. In cases where a seller can't check a buyer's income level (or student status) directly, they can practice price discrimination by throwing up some sort of inconvenient roadblock — requiring buyers to clip a coupon or mail in a rebate to get a discount. Busy, high-earning professionals often won't bother, and will end up paying the higher price, while price-conscious bargain hunters will take advantage of the deal when they otherwise might not have bought the product at all. (On the other hand, a restaurant charging more for steak than chicken is not "price discrimination," because the steak really does cost the restaurant more to provide.)

In the case of a Netflix DVD plan, if you watch movies and mail them back as fast as you can on a plan that lets you check out 2 DVDs at a time, every month you could watch about 20 movies for a monthly fee of $12. If you rented the same recent releases on Google Play at $2-$5 a pop, it would average around $70.

So this could be a form of price discrimination by the studios. If you care about price more than convenience, you can just splurge for a Google Play rental whenever you want to watch a recent release, and you can watch it on your laptop, your tablet, or your phone, without the need for a DVD drive, but you'll pay around $70 per month depending on how many movies you watch. On the other hand, if you want to save money, the cheapest legal way to watch all new releases as soon as they're released to home media, is with a Netflix DVD checkout plan — but the inconvenient roadblock is that you have to be willing to deal with those clunky DVDs.

It's an odd explanation, but it's hard to think of any other reason why Netflix and the movie studios would keep propping up the DVD format, when it would be easier for them and for us to just offer "virtual DVD checkout" and stream the same content, as long as Netflix and the studios got paid exactly the same amount of money as they would make when we watch the content on a physical DVD. The inconvenience of DVDs allows Netflix and the studios to price-discriminate and separate the wealthy from the price-conscious, and extract money accordingly from each group — especially when higher-income users are more likely to own tablets or DVD-free laptops, and lower-income users are more likely to own DVD players. Can you think of any other reason why they don't simply replace all DVDs with comparable streaming "checkout" options?

Well actually, I can think of at least one other possibility. With a "virtual DVD checkout" plan like the one I described, users might feel some aggravation every time they add a virtual DVD to their queue, only to be told they have to wait 24 hours or more before they can watch it. With physical DVDs, such delays are caused by the postal service and by the physical impossibility of having a DVD show up instantly in your home. But under a virtual DVD checkout plan, despite the fact that it would be more convenient overall, the delay before you can watch a checked-out movie is imposed by Netflix (possibly at the insistence of the movie studio), so that might be where the user focuses their aggravation instead. It's conceivable that even though Netflix knows that a "virtual DVD checkout" plan would be more convenient for users, those users would irrationally come to resent Netflix more for imposing the delays on movie viewing, so the company just decides not to wade into those waters.

I'd be interested in hearing other theories, as long as people understand the question: Why movie studios don't allow movies to be streamed in a manner that mimics, as closely as possible, the experience of checking out DVDs by mail from Netflix (including, say, a mandatory delay between the time you select the movie and the time that you can watch it). Saying "Because it competes with their own DVD sales" is not an answer, since Netflix's physical DVDs also compete with a studio's own DVD sales. But there may be other answers that are actual answers, and maybe one of those is the answer.

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Are DVDs Inconvenient On Purpose?

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  • by Strider- (39683) on Wednesday March 26, 2014 @02:13PM (#46586055)

    I work with a number of locations that lack any form of high speed internet. They have enough internet to facebook, order the DVDs, etc... but nowhere near enough bandwidth to actually stream the movies. The DVD-by-mail option is their only option, if netflix et al were to shut down this service, they would be very unhappy.

  • Consider... (Score:4, Interesting)

    by JMJimmy (2036122) on Wednesday March 26, 2014 @02:17PM (#46586131)

    Digital streaming is without a doubt more convenient from a certain standpoint, especially a short term view. There are several reasons DVDs are important to some as well as a longer term view. For basic consumption it's great, not so much for ownership and control.

    First, there's the human aspect to it. Many like to collect objects - from stones to Elvis memorabilia to various forms of culture and everything in between. There's a certain satisfaction to owning a physical object like a DVD or book. While it can be taken to unhealthy extremes, for most it's just a hobby.

    Second there's the long term view. Digital streams, cloud based collections, etc are all temporary. No one owns anything and are at the mercy of corporations as to whether that item will stay viewable over the long term.

    Third, not all services are created equal. While I can buy just about any DVD I'd care to, when it comes to Netflix the offerings are pathetic simply because I'm above the 49th parallel. I'd be paying the same amount for a fraction of the content simply due to my geography.

  • Re:No Internet? (Score:5, Interesting)

    by captainClassLoader (240591) on Wednesday March 26, 2014 @02:19PM (#46586147) Journal
    In the rural valley I lived up until last year, my Internet was provided by cellular modem or MiFi - The only alternative was satellite, and the latency of satellite prevents VPN usage that I need for work. The MiFi comes with a 10GB cap, which is fine for most of my home and business usage. But 10GB is about 3 streamed movies. So I buy DVDs instead.
  • by dysmal (3361085) on Wednesday March 26, 2014 @02:19PM (#46586151)
    It's also hella expensive to stream shows for the rug rat in the back seat when we're on a road trip. Cheaper to give my money to Netflix than to ATT/VZW for the trips that i need to keep the little snot gobbler sedated so i don't go postal.
  • Oh good grief... (Score:5, Interesting)

    by the_skywise (189793) on Wednesday March 26, 2014 @02:20PM (#46586159)

    There's more at play here than Netflix and "Hollywood".

    You have wal-mart, Best Buy and Barnes and Noble, Amazon, Redbox and other stores/physical places that continue to market DVDs.

    Getting rid of the DVD market means that the marketing of movies falls from many stores to a *few* streaming providers which would give them far more leverage on pricing and distribution then Hollywood is ready to give up.

    Also, streaming movies has relatively expensive up front costs requiring internet service and a decoder box plus an additional monthly fee that some people can't afford. (Let alone the older generation that can't figure out all that new-fangled GOOEY menu streaming stuff... and have enough problems just putting a disc in their DVD player!)

  • by franknagy (56133) on Wednesday March 26, 2014 @02:22PM (#46586181) Homepage

    This constant harping on how great streaming is bugs me. While that may be true in urban cores,
    in the technological hinterlands we are lucky to *have any* Internet connections. When home,
    I have problems getting short YouTube videos to play at all (if they do play, I get long hangs
    every few seconds). Last time I looked my choices were AT&T DSL (I to not think they can provide
    Uverse to my home), Comcrap or Clear (which is what I have). I used to have AT&T for home phone,
    DSL and GoPhone cell service - I will *NEVER* willingly be an AT&T customer again if I can at all avoid
    it. And there is a reason I listed the 2nd choice as "Comcrap".

    I have never had Netflix but if I were to sign up it would be only for their DVD service.

    As is Ihave a large collection of DVDs in hand (TV shows, movies - lots of anime). So I do not
    find them "clunky" at all.

  • by Anonymous Coward on Wednesday March 26, 2014 @02:22PM (#46586189)

    Wow, your social circle is a bit limited. Visit your grandmother in the retirement home occasionally. You're making a lot of assumptions about what "almost everyone wants" that I don't think are true.

    You point out that having DVDs allows studios to make more money, and then wonder if there's any other reason they do it. WTF? They make more money this way, of course they're going to do it. No other reason is necessary.

    You want to pay more to see a new release? Try a movie theater or iTunes. This is the dumbest thing I've seen here.

  • lt;dr (Score:4, Interesting)

    by AK Marc (707885) on Wednesday March 26, 2014 @02:24PM (#46586235)
    DVDs are "good" because you own them. You can "stream" them from your DVD player to your TV any time you want. Internet out? Grab a DVD off the shelf.

    They are also low-barrier. Any granny can pay $100 for a DVD player (likely less) and have someone plug it in if they don't want to, but most RCA DVD players come with all the cabling, and it's all color coded. Granny doesn't need to figure out how to "stream" or anything. Doesn't have to buy a special Smart TV, or media device or computer. DVDs just work. You pick the one you want, put it in, and it starts playing (after 20 minutes of warning and advertisements).

    What's wrong with "permanent" and "just works"?
  • Re: tldr (Score:5, Interesting)

    by jedidiah (1196) on Wednesday March 26, 2014 @02:36PM (#46586389) Homepage

    Ripping DVDs is certainly trivial. It's an ancient DRM mechanism that was nearly instantly hacked. The relevant information was widely shared and suitable tools are legion.

    This stuff can't be integrated into the likes of iTunes because of the DMCA but it's otherwise readily available and easy to use.

    The idea that DVDs in particular are difficult to deal with just sounds like the rantings of an Apple fanboy with his blinders on too tight.

  • Sorry, what? (Score:5, Interesting)

    by gstoddart (321705) on Wednesday March 26, 2014 @02:36PM (#46586391) Homepage

    Why do Netflix and a few other companies keep the DVD format alive, when streaming is more convenient for almost all users?

    You lost men when the premise of your story was false from the first sentence.

    My network speeds and bandwidth allotment don't make streaming 'more convenient', it makes it stupid. If I want to watch a movie twice, why would I pay my ISP twice for the bandwidth?

    If I want to watch a Blu Ray film, I pop it in and watch it. No jitter, no lag, no asking permission. I just press play.

    If I want to watch a movie on a plane, I just bring a few disks with me and put them in my laptop.

    If I want to loan a movie I own to a friend, I walk to my shelf and hand it to him. He takes it home, and can watch it all he likes.

    Heck, I can go to a place which doesn't have good interwebs ... and you know what? I can still watch a DVD as long as I still have electricity.

    There's no metrics being gathered, no opportunities for targeted advertising, and none of the aspects of streaming which I find annoying and inconvenient.

    I've never streamed a movie in my life, and I'm hard pressed to figure out why I would.

    You kids and your shiny baubles. Get off my damned lawn.

  • Re: tldr (Score:5, Interesting)

    by jedidiah (1196) on Wednesday March 26, 2014 @03:08PM (#46586733) Homepage

    >> VGA cable + Audio Patch Cable + Capture Card = rip almost anything.
    >
    > Yeah that'll look great on your 70" 1080P television.

    It's Netflix. It's not going to look that great on your 70" TV anyways. '-p

    Every glitch in the stream caused by network congestion or rogue garden gnomes is going to show up in the end result. You will get to snicker at Netflix, your ISP, and the FCC every time you watch it again.

  • Re:tldr (Score:5, Interesting)

    by sneakyimp (1161443) on Wednesday March 26, 2014 @03:46PM (#46587033)
    As I recall, Netflix tried to close down its DVD business but had to keep it thanks to customer rage [wsj.com]. The stockholders were pissed too.
  • by jedidiah (1196) on Wednesday March 26, 2014 @03:47PM (#46587043) Homepage

    The things I like I get to keep.

    I can use them any time I like. I can use them any place I like. I can use them on any device I like.

    I don't have to worry about contracts expiring or crappy phone networks or landline ISP bandwidth caps.

    I don't have to worry about how they have cropped the video or otherwise messed around with the source material.

    Drives are large enough now that a decent media collection might not even span more than one drive. Shoved in a box, the originals won't take up any more space than anything else in the modern suburban lifestyle.

    Clearly you have a problem with individuals retaining their personal property rights.

  • by fyngyrz (762201) on Thursday March 27, 2014 @12:17AM (#46590263) Homepage Journal

    For one thing, until US networks get a LOT better, the quality of a physical Blueray absolutely annihilates streaming here.

    Neither DVDs or Bluerays suffer from your local ISP suddenly going offline, or a nearby hospital deciding to have a hires video conference between many points. No stuttering, no crashing (hello, Roku... you ever going to fix that crashing bug in your players?)

    And, if we can talk about ownership here, each DVD/Blueray is a physical object which isolates risk of damage to one title at a time (as compared to a library on HD or in the cloud), and eliminates a third party who has decisive control over what you (think you) own, and how you can use it, in the "cloud."

    And, like LPs before them, CDs, DVDs, Bluerays... the packaging often contains much interesting and collectable goodness. Or is such goodness in and of itself.

    And, you can loan out a CD/DVD/Blueray, Swap them. Treat them as if, you know, you owned them. What an amazing idea, eh?

    Just as a fer-instance, we've been watching Vikings, streamed from the History channel. We really enjoy the show. It starts in lowres; jerks into hires. Stutters and goes back to lores. Breaks for commercials. Swaps into hires without, apparently, properly telling the system it's changing, judging by the spattering of random looking mpeggy squares on screen when it's changing res. And the commercials appear to have been shot in CDV or something... "lores" hardly suffices to describe them. Basically, other than the content itself, the whole "streaming experience" there is totally bottom feeder. This is pretty much a worst case, but it's not all *that* uncommon, and many audio streams are also extremely low quality.

    The CD/DVD/Blueray collection, however... impeccable. Just as good today as each title was when we bought the stuff. Given the new upscalers, perhaps even better.

    CDs, same thing, really. There are a few good streams on Internet radio, but generally... not so much. 128k streams... meh. 192 is tolerable, 320 is more like it. OTOH, a good CD (for example, one from Telarc) always sounds *X*awesome*X*, and will for decades, perhaps longer.

    Maybe my standards are just head and shoulders too high, but that's why *I* am still not all hepped up on streaming.

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