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Netflix CFO Sees No Future for Amazon Rentals 136

Dave H. writes "In comments made at the Morgan Stanley Small Cap conference last week, Netflix CFO Barry McCarthy says he doesn't think Amazon.com will expand its video rental market into the US because the retailer's infrastructure wouldn't work to its advantage with video rentals. He also sees the window between theatrical and DVD releases shortening, which is a Good Thing." From the article: "The price of entry is much higher now than it was in the past, both in terms of the cost of locating warehouses and just the mere fact that Netflix and Blockbuster are both considerably larger now. McCarthy then said that Amazon is in the classic make-versus-buy dilemma, noting that the company can either start from scratch or try to acquire service through either an acquisition or partnership." Update 6/20: Barry McCarthy's position at Netflix corrected.
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Netflix CFO Sees No Future for Amazon Rentals

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  • I'm here first!

    Oh, wait...
  • Hmm, might be a hint that Amazon buys out Netflix....
    • I think it was more of a strong hint that Netflix would not be opposed to a partnership with Amazon.com, actually.
  • by CypherXero ( 798440 ) on Sunday June 19, 2005 @06:33PM (#12858860) Homepage
    ...until I become a CEO of a large company, so that I can tell other CEO's what to do and think!
    • by eclectro ( 227083 ) on Sunday June 19, 2005 @06:45PM (#12858924)
      ...until I become a CEO of a large company, so that I can tell other CEO's what to do and think!

      I can't wait until I become a CEO of a large company so that I can patent what other CEOs already do and think.
      • Political types and whores already have the entire field of screwing people over patented. :)
      • Patent for the role of a one click CEO.

        Abstract
        The role CEO is both novel and none-trivial, as such, this patent is written to outline these processes.

        Claims
        1. The CEO's age shall be greater than 40
        2. The role shall have been applied by using the following options
        Brown nose way through ranks.
        Born with a silver spoon.
        3. The CEO shall spend all his time in the office barring the following ommisions:
        During a golf tournement
        During another unspecified sporting event
        During the mornings
    • by darkPHi3er ( 215047 ) on Sunday June 19, 2005 @07:33PM (#12859147) Homepage
      1. Microsoft CEO sees no future for LINUX

      2. RHEL CEO sees no future for UNIX

      3. Google CEO sees no future for Yahoo!

      4. RIAA CEO sees no future for P2P

      5. CBS CEO sees no future for HBO

      6. Western Digital CEO sees no future for Lexar

      7. Oracle CEO sees no future for MySQL

      8. Sun CEO sees no future for Dell

      You read it here first!
    • I'm the CEO of a company whose main function is to post on Slashdot.

      Your posts have no future. Please leave and let our company's posters handle things.

  • by epaton ( 884617 ) on Sunday June 19, 2005 @06:34PM (#12858868)
    please dont go into business against us, we are for sale
    • Sure, why not?

      Most that start their own company and do well, at some point want to retire and be bought out.

      Tens of millions goes a long way towards retirement.
      • But then you don't want to see your hard earned product get ruined because your business rilav offers you more money. You have been competing for the same customers for years, and many will have loyalties, either technological or psychological, you can't feel happy about giving up so easily.

        It would be like Linus selling Linux to Microsoft.

        It just wouldn't happen.

        Now, if members of your own hand picked team come up with a buyout offer, or maybe a business partner from the very beginning, or your own chi
        • Isn't the point of working to get money?

          You come up with an idea, form this company (like Netflix)... and it grows. While you are CEO, you're raking in the cash, doing all you can to IMPROVE your product to get more customers to get MORE MONEY.

          That's what it boils down to.

          If you accepted a buyout, you'd be rich. The end. Retired, never having to work another day in your life.

          Why would you continue to care about customers that do absolutely nothing for you? It wouldn't be your problem anymore, it'd be th
        • > It would be like Linus selling Linux to Microsoft.

          Not exactly. The point of running a business is to make a proffit. It's a job where you hire yourself (self employment).

          When your ready for retirement you sell out or pass it down.
          (Selling out gives you a nice retirement fund, Passing it down gives your children jobs).

          Linux however is a project. Money is not the objective thus it isn't for sale.
          That however won't prevent Microsoft from making an MsLinux. Just means Ms Linux will have to compeate with
  • Blockbuster Online (Score:5, Insightful)

    by Rick and Roll ( 672077 ) on Sunday June 19, 2005 @06:34PM (#12858869)
    I signed up for Blockbuster Online only to discover that A) I don't rent enough for it to be a good deal and B) Anytime I rent something I want it right away.

    I was impressed that they had many shipping locations. Unfortunately I was unable to take advantage of these because it took 2-3 days to get mail from the shipping location to my house, which is in the same state as the shipping location.

    It seems shipping locations would be a lot of the cost of setting this up. Perhaps smaller businesses could pool resources?

    • I signed up for Blockbuster Online only to discover that A) I don't rent enough for it to be a good deal...

      Don't forget that you get the two free instore game/video rental coupons a month. When you consider that games rent for $6.99 each, think of it as paying for the game rentals and getting the month of video rentals (12-15 a month) for free...
    • by account_deleted ( 4530225 ) on Sunday June 19, 2005 @07:15PM (#12859066)
      Comment removed based on user account deletion
      • Infohilsm! (Score:3, Funny)

        by rekrutacja ( 647394 )
        friend who is 20 years old and is one of those infoholics who accumulates data the way old women accumulate cats... he gets five or six movies a week, copies them all in a few hours, and sends back the originals without even watching them

        Infoholism... You should tell me that 10 years ago... Or at least before RSS was invented...
      • by Anonymous Coward
        I really disagree with you on this.

        I use to have NF and I have to say it is a amazing service that saves me time, and increases my enjoyment of the time i spend in front of the TV.

        NF allowed me to make a list of all the TV shows and Movies that I wanted to see. I was able to make sure that I would see those random movies that people always recommend, but i never remember when i get to the video rental shop.

        I stopped watching a lot of TV becuase I was able to watch all the same shows i like, but commeric
        • NF allowed me to make a list of all the TV shows and Movies that I wanted to see. I was able to make sure that I would see those random movies that people always recommend, but i never remember when i get to the video rental shop.

          Aside from selection, that is the best part of Netflix. Now, when I read a movie review that makes me want to see it, I just open a new tab and put it in my queue.

      • You forgot people living in semi-remote locations with limited/no movie rentals and/or obscenely expensive satellite service. Alaska, etc.
      • by jackbird ( 721605 ) on Sunday June 19, 2005 @10:37PM (#12860070)
        accumulates data the way old women accumulate cats... copies them all in a few hours, and sends back the originals without even watching them.

        I've never heard of anyone doing that to a cat.

      • The target demographic seems to be hardcore movie buffs and (let's face it) "pirates."

        Don't forget road warriors. Back when I used to have to travel for work, I had a netflix subscription. It was great. I could watch movies on the plane, and in my hotel room if I was in some crappy little town with nothing to do.

        The best part is I could grab the movies at home and return them from ANYWHERE. Then, I'd have more movies waiting for me when I got home.

        It required no thought or effort on my part, a

    • Anytime I rent something I want it right away.

      The best way around that is to rent two or three days in advance of anticipating when you want it. With the concept of a queue and no limit on the length of time the DVD can be in your possession (in the case of Netflix), you're all set.

      One can imagine the server peak for Netflix is probably Monday and Tuesday for those planning for the weekend.

      Though it is funny to live less than one mile from a Netflix warehouse and know I could walk over there, pick it

    • B) Anytime I rent something I want it right away.

      My ultimate dream would be on-demand movies, but in lieu of that and soul-snatching DRM that would have to be in place to actually make it a reality, I wish Blockbuster would allow you to order a disc online and then have it burned at the local store for pickup. They'd have to work out some kind of payment arrangement w/ the MPAA (I think?), but if anyone could do it right now it's probably Blockbuster.
    • The Postal Service claims one day service in state for letters in NC, but my postman told me that the DVD envelopes, while they are sent first class, don't count. Not all first class is first class, apparently. They take two to three days to reach me also, although I am not convinced they are always shipped when the web site claims they are.
      • I am not convinced they are always shipped when the web site claims they are.

        I thought the same thing. I began to generally hate the service, which was definitely a factor in cancelling it.

    • I trialed Australia's Bigpond Movies and I discovered that A) The weekends burn shipping time and B) Some discs are so badly scratched that they won't play in my DVD player.

      This added up to a waste of my subscription.

  • by Buster Chan ( 755016 ) on Sunday June 19, 2005 @06:36PM (#12858883) Homepage
    I found that sentence interesting about how he found the window from theatrical release to DVD release shortening. It's probably because a lot of people are downloading movies now, on the day when they come to theater, and so since people are watching free home video copies of new movies anyway, the shorter window is now allowing producers to profit from people who desire early copies to watch at home. Or the following scenario probably happens a lot now: someone goes to a friends' house and watches a downloaded movie that's in theater, and then that person wants their own copy but doesn't want to download, and then that person gets less and less interested in having their own copy as time passes and newer movies are available, so a shorter window is important in getting customers like that. I'm not sure what my opinion about that is, really -- whether or not it's a good thing or a bad thing.
    • The availability of movies online will certainly reduce the window between theatrical and home video. Currently distributers make a lot of money by keeping that window there, but others are exploiting that window to make significant amounts money for themselves. There are lots of businesses that are supporting their business models with free content. We have already seen the progrssion to more global release windows as a result. Unless online piracy can be stopped (which is unlikely), the only things studio
    • From a business perspective, it could be a good thing, but from the point of view of someone who loves watching movies in theaters, it's a bad thing. Movies are in theaters such a short time now that one all but "has" to see them on opening weekend to get the full experience. Home video has certainly made it possible for anyone to see far, far more movies than they ever could if they were totally reliant upon theatrical exhibitions, which is a great thing, but there's something special about seeing movies i
      • No one is talking about taking movies out of the theaters. They just want them on DVD sooner. Some of us don't appreciate the movie theater experience, but still love movies. By holding movies back from DVD release the studio's allow the good movies to float to the top and the bad movies to sink before the home viewers get a shot at them. As home viewers become more and more of the market, this means that the studio has less and less control of sales through marketing. DVD renters have already been war
        • But the theatrical-release-to-DVD-release window is so short already - just a few months, now - that shortening it any more will mean nearly simultaneous releases. That would essentially kill theatrical releases, as even many people who enjoy theatrical releases would get the DVDs simply because they're more convenient, and convenience trumps most other things in the American marketplace.
    • I doubt that would be the main reason. I think it has more to do with advertising costs.

      Most films are not block buster hits and not having to rebuild interest from scratch can save a lot of money.
  • by syynnapse ( 781681 ) on Sunday June 19, 2005 @06:36PM (#12858884) Homepage
    I feel like the time between theatre and DVD has shortened signifigantly already thanks to the quality of the films. There is an interrelationship between these two things. How long did it take National Treasure to go to dvd? a week? two?
    • by Spodie! ( 675056 ) on Sunday June 19, 2005 @07:11PM (#12859052)
      It's not such a simple process to shorten the time to DVD release. I work in the sound department of a large motion picture studio and all the work I do is for DVD.

      Nowadays, every DVD release is dictated by the marketing department. Almost two years ago we fundamentally changed every aspect of our workflow in order to be able to deliver final DVD audio to the authoring department faster. We shortened our delivery time by a week, but marketing wants it much faster - often, this is not possible.

      The biggest problem is that the company is so large and there are so many titles in the pipe that the scheduling of elements being created by outside venders is very problematic - final approved picture, final approved audio, extras, subtitles, DVD menus, etc. Not to mention the fact that there are so many idiots up the chain that have no idea what's involved in getting the actual work accomplished.

      The President of my company has said that he wants to eventually see the day when a person can walk into the theater, watch a film and on the way out buy the DVD. This could, and probably will happen, but it would likely be a domestic only 5.1 and/or Lt/Rt with little or no extras. The replication time alone would probably push back the theatrical release a week or so.
      • >The President of my company has said that he wants to eventually see the day when a person can walk into the theater, watch a film and on the way out buy the DVD. This could, and probably will happen, but it would likely be a domestic only 5.1 and/or Lt/Rt with little or no extras.

        That would be awesome. I really dont like all the extras, and you can't tell me it doesn't cost more money to make. If what you suggest is true and the movies are priced cheaper than current DVDs, sweet.
      • final approved picture, final approved audio, extras, subtitles, DVD menus, etc.
        Wow, some of these menus and non abortable junk that we have to watch just to get to the movie has been final approved by someone? Oh my.
      • The President of my company has said that he wants to eventually see the day when a person can walk into the theater, watch a film and on the way out buy the DVD. This could, and probably will happen, but it would likely be a domestic only 5.1 and/or Lt/Rt with little or no extras.

        People are already doing this with pirate copies.

        Last time I went to the cinema, there was someone a minute down the road with his DVD warez neatly laid out on the pavement.

        How's the studio going to undercut this guy?
        • Given identical quality (or at least the perception of identical quality), most people will pay more for the "official" version of something.

          For example, whenever I got to Fenway Park I pick up some Red Sox souvenirs; anything in/immediately around the park will be legally licensed, even with the outlying presence of bootlegging vendors who charge significantly less.

          Check out Yawkey Way (next to the park, filled with official vendors) on any home game night and you'll see what I mean, it's PACKED with fan
          • In the Vatican City> In Dharmasals?

            Are you the pope? The Dalai Lama?

            Given same quality people will buy the cheapest.

            The burgeoing black market of non "official" stuff attests to that.

        • If one is a a camcorder snuck into a movie theater and the other is an official release, it's easy to see what I would pick.
    • How long did it take National Treasure to go to dvd? a week? two?

      Theatrical release date: Nov 19, 2004
      DVD release date: May 3, 2005

      Took 2 weeks shy of six months, which is the norm for most movies.

      I worked in video rental for several years, getting out of it about 4 years ago. Six months was the time between theater release, and video rental release. It was then anywhere from a month to sometimes 3 months before it was available to consumers to purchase. Once DVDs came out, the biggest hits wer

    • How long did it take National Treasure to go to dvd? a week? two?

      Before the theatrical release?

      A few days... ;)
  • I am the bestest ever. At everything. Nobody can beat me.

    What, I'm just doing what all these CDO's do. Tell you what, when one of these guys says 'Our business model is flawed. We're totally going to get taken over by another company' let me know, because /that/ will be news.
  • It doesn't matter if Amazon can break into the market or not. Most people who don't feel like going to the video store to rent or buy their videos probably just... err... "obtain" their movies online for free anyway.
    • exactly.

      the bigger issue is the slow uptake for media center PCs. Plus, no one has developed a low to moderate cost media center appliance designed to go into your living room. It doesn't exist, so movie downloading as a business is in the air. At best, mail order movie rentals is a risky business to invest in. The ramp-up time to develop the business (and cost) might be a waste, as one can often not account for public sentiment.

      I read an interesting article the other day about J.K. Rowling. She's decided
    • Most people who don't feel like going to the video store to rent or buy their videos probably just... err... "obtain" their movies online for free anyway.

      My idea of "free" doesn't include broadband at $45/mo + a PC with DVD recorder + software + media + surcharges for gigabyte downloads over IRC or Usenet.

      • But that's just it. Many people are willing to pay ~ $0.80 - $1 (USD) per GB to download stuff, even illegially. I'd guess that many would pay 50-75% more for the convienience of a HTTP download with a dl manger, which is a LEGAL download, of known quality from the studios, or a licensed business.

        The big thing is that is far to cheap for the studios, but I'm not sure they can keep costs this high... There are too many people who know how and are willing to get Movies via net for $1 or less, and full first
    • My girlfriend tells me her brother orders DVDs from Netflix, rips and burns them, and sends them back to get new ones as soon as he is done. Which is a little bit odd, as 1) unless I am mistaken (never having used Netflix myself, I very well could be) it does cost something and 2) he spends all of his time either doing that or playing FPS games and never actually watches any movies.
    • I think the /. overestimates the number of people who "obtain" their movies for free. Admittedly, some people are a little reluctant to admit that they do something that is illegal. But I've never met a person in real-life (as opposed to on-line) who admits to downloading movies off of the internet. I would guess that the average Joe Internet User has no idea where to go to get free movies, because there is no site called www.getfreemovieshere.com.
  • Next big thing will be direct to computer downloads. Sure people are doing it illegally, but if you make a store, it will make ph@t l3vvt. Just look at any itune clone for this. It won't just stop at movies either, it will be a virtual on demand for any television show ever made. Now how it will play out with many rights holders is the question. But undoubtably, in the next 20 years, home entertainment systems will be hooked up directly to the internet. If you think on demand from cable is cool, you h
  • From the article: (Score:5, Insightful)

    by Kiyooka ( 738862 ) on Sunday June 19, 2005 @06:42PM (#12858912)
    "Now Netflix CEO Barry McCarthy says that he doesn't see Amazon entering the online movie rental business in the US, putting ice on the idea that Amazon is naturally suited to the business."

    There you go, cause and effect. What else did you expect? Do you think the CEO of Netflix would say: "the market is expanding rapidly with absurdly high profit margins and plenty of opportunities for newcomers. Amazon is perfectly suited to join the competition and can make tons of money with little alteration to their existing infrastructure. I'll be the first to welcome them with a handshake while we prepare to downsize!"?

    Doesn't seem like anything out of the ordinary to me.

    "As to whether or not Amazon and Netflix are in negotiations for a partnership, McCarthy said "my comment is 'no comment'." I think that statement is about as obvious as obvious gets. No doubt non-disclosure agreements are par for the course, but sometimes nothing is so revealing as a "no comment". Then again, that could be read as some kind of public invitation to Amazon. Idunno... this is /., somebody smarter than me help me out here...
  • I was skimming the article and where it said "Morgan Stanley Small Cap Conference" I thought I saw "Stanley Cup"
  • Wow! (Score:4, Funny)

    by slavemowgli ( 585321 ) on Sunday June 19, 2005 @06:48PM (#12858938) Homepage
    CEO claims company is ahead of competition! News at 11.
  • by sumday ( 888112 ) on Sunday June 19, 2005 @07:05PM (#12859028)
    with netflix and blockbuster, you can have as many DVDs a month as you wish, but only 3 at a time, right?

    amazon's service only allows 4 dvds a month. and you're only allowed 2 at home at any one time. at least, thats what they offer in the UK.

    now, surely the people that are most likely to use a service like this are going to want alot more than that in return for their monthly fee. i watch alot more that one film a week, and i'm only an amateur film buff. so if i were to get one of these services (which i may do in the future) i'd be getting the one that allows me unlimited DVDs.

    i did the math, and using the amazon service, you're not saving alot by getting the monthly fee. and if you only get 3 in one month, you lose money compared to renting(assuming renting is £2.50 like at my local rental place).

    and if you live near a good library, its even cheaper and you can keep the DVDs for a week.

    i'm usually a great supporter of all things amazon, but they really need to rethink their business model.
    • Ah yes, but look at how Amazon places this. Go to Amazon.co.uk and search for a DVD. Just below the 'buy' button is an 'add to rental' button (and also below the picture and basic info is a huge 'rent this dvd' banner). They are going to get a hell of a lot of people which only watch 4-6 DVDs a month and for cheaper than one dvd they could rent 6 for a month. To most, that seems like a great deal, especially when you can keep each DVD for 15 days (on the 3 at a time, 6/month plan).

      Their turnaround is also
    • Nope, you get 6 a month, 3 at a time, which is quite a bargain compared to normal rental shop which can be anything up to £3 per movie rented.
    • IDK, I like netflix. I get 5 out at a time, with unlimited rentals, and turnaround of 2 days or so.
    • Netflix has more than one plan. You can have up to 8 films out for something like thirty bucks a month.

      So depending on how much of a buff you are, you can have more films out.

      I'd never move away from Netflix. I love their system, and despite hearing about other people having problems, they've been terrific for me. One cracked disk in many months of subscription, and that's the only problem.
  • I thought Netflix used to suck, bad turnaround times, so I tried Walmart. Walmart's service was worse, and within a month, Netflix had bought them out. Netflix seems improved now, better turnarounds and they even work on Fridays, which they didn't seem to be doing previously.

    Just signed up for Blockbuster's free trial to see how that goes.

    • Blockbuster is going to have to do something to remain afloat. They still have brick&mortar stores to support and I don't think virtual rental is going to bail them out. The expenses affiliated with their hard stores cannot remain fixed and in order to offset them, those stores' revenues will have to increase just to break even.

      An interesting question is whether Blockbuster will find a better business model than to mimic NetFlix. It was obviously an immediate counter-move to watch their market share
      • Blockbuster needs to work out a deal w/ the MPAA to burn DVDs at their stores. This way you have access to the entire catalog of thousands of DVDs immediately. You'd still have to return the DVD which they'd use as inventory so they weren't burning a copy each time, only if they were out of stock. They'd also need to add kiosks for burning DVDs and use the current stores for renting video games, buying entertainment focused magazines and books, junk food, and providing movie catalogs with information abou
        • Blockbuster needs to work out a deal w/ the MPAA to burn DVDs at their stores. This way you have access to the entire catalog of thousands of DVDs immediately.

          You are so right. This would also allow them to make late fees more lenient, since there would be no shortage of little round plastic disks to worry about.

          They could even let you keep them as long as you wanted, or forever, so long as you had $20 on deposit for each DVD you had out at one time. If they were burning DVDs locally they could adv

  • Amazon, buy me out so I can retire a rich man on a tropical island.
  • CFO, not CEO (Score:3, Informative)

    by nsayer ( 86181 ) <nsayer@MENCKENkfu.com minus author> on Sunday June 19, 2005 @07:50PM (#12859247) Homepage
    Reed Hastings is the CEO.
  • Equity Marketing (Score:2, Insightful)

    by Doc Ruby ( 173196 )
    NetFlix is in the classic "buy me" marketing phase: they see that their own infrastructure is dependent on shipping DVDs, but the immediate future is downloading/streaming data. Since they think Amazon wants to be in the DVD shipping business, they're telling Amazon to buy NetFlix, to buy entry to the "competitive market". If McCarthy is smart, he'll take his buyout money, and sink it into a streaming company.
    • I think you're right that NetFlix is sending signals to Amazon that they want to be bought out, but I think you are wrong that there is no future in shipping. Downloading is undoubtedly the future, but not the immediate future. I think we are still a few years away before it starts to take off and with HD/BluRay, discs will continue to play a huge role for the foreseeable future.

      NetFlix is afraid that Amazon will enter the market against them, leveraging their massive infrastructure, and they want to p
      • Our disagreement depends on what we mean by "immediate". I don't think there's any other major development in "home video" between the current state of the art, NetFlix, and Internet delivery. In fact, NetFlix has been the only new development since BlockBuster genericized home video in the mid-1990s. At the time, BlockBuster looked short-lived, because of Internet distribution. But in 1995, we didn't realize how long it would take for the Net to get enough Americans broadband, and how long it would take Am
  • by Xugumad ( 39311 ) on Sunday June 19, 2005 @08:00PM (#12859309)
    Okay, fine, Amazon.com may or may not expand it's DVD rental service into the US. I don't see how on earth it lacks a future if it doesn't, though? Its rental service seems popular here in the UK (I'm pleased with it, I know friends that are pleased with it, anyone got any actual numbers?), so it may not expand into other territories anytime soon, but...

    So what, exactly?
  • I swear its the killer app of the late 2000's (as in from 2005-2009). Being able to rent movies over broadband is a killer app. Imagine Netflix's library available on demand. Fucking outstanding.
  • Are we supposed to be surprised that he'd say this? I mean, was he supposed to say "Oh noes! Amazon is going to steal our market!" ?
  • Forgive me, i'm a new /. poster, and couldn't figure out which thread to put this in (since it replies to multiple threads). Just some general comments: 1) With all the discussion of direct downloads, has anyone tried Cinemanow and/or Real's movie rentals? With the seeming convergence of media and computers (ie Windows Media Center Edition, Mythtv actually runnable on a $300 PC with realtime transcoding), maybe this actually is an "oh crap, we're screwed, buy us now Amazon". 2) In regards to the shortened
  • Sounds to me like he is just asking to be acquired by Amazon.
  • As soon as subscription-based HD video-on-demand becomes available, Netflix and Blockbuster will begin their final declines.
  • Amazon wouldn't do too badly, compared to other companies, but it's a tough market to enter... Wal-Mart, the corporate giant, didn't succeed.

    Of course, Amazon already has a distribution network... More competition wouldn't hurt, and I'm sure that Amazon would do a better job of it than Blockbuster Online.

    On a side note, any Netflix users out there who are tired of fighting to get your queue in order, try out my Netflix Queue Manager program, FlixQueue, at http://www.5hyphen.com/FlixQueue [5hyphen.com]. It will s

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