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Are DVDs Inconvenient On Purpose? 490

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?

Comments Filter:
  • tldr (Score:5, Insightful)

    by hypergreatthing ( 254983 ) on Wednesday March 26, 2014 @02:04PM (#46585967)

    It's probably because content providers are worried that someone will figure out a way to rip the netflix stream while they're confident that the physical medium will provide an adequate protection scheme using DRM while the truth is probably the reverse.

  • by SuperKendall ( 25149 ) on Wednesday March 26, 2014 @02:06PM (#46585985)

    Do you think Netflix would offer every movie on streaming if they could? Of course they would.

    But Netflix also wants to keep a reasonable flat rate for streaming, so they offer what they can and try to grow the user base so they have enough overall income to pay for more popular titles to be included.

    Until the content providers budge on price it's really that simple. After all, you can get EVERY new movie on iTunes to rent or buy - for a cost that to me is WAY too high. So until then I keep the dual Netflix streaming/disc plan so I can get discs for the few movies released these days that are worth watching.

  • Of course (Score:5, Insightful)

    by Huntr ( 951770 ) on Wednesday March 26, 2014 @02:07PM (#46585997)

    Everything about the --AA entertainment industry is purposely inconvenient. That way they can sell you the next, slightly more convenient version of the same content you already purchased.

  • Re:tldr (Score:5, Insightful)

    by GuitarNeophyte ( 636993 ) on Wednesday March 26, 2014 @02:08PM (#46586007) Homepage Journal

    Read the first 5 "paragraphs" and the last 2. All the rest is repitition of the same thing in different orders.

  • by jaymz666 ( 34050 ) on Wednesday March 26, 2014 @02:09PM (#46586021)

    because physical media has that whole first sale doctrine which allows the rental of the physical goods, virtual goods not so much.

  • Re:iTunes (Score:3, Insightful)

    by jaymz666 ( 34050 ) on Wednesday March 26, 2014 @02:12PM (#46586039)

    iTunes is only useful for apple people.
    So I will complain about it, Netflix works on my TiVo, my PS3, my android phone, my android tablet, my computer, etc.
    iTunes only works on my computer, if I have it installed. And since iTunes insists on installing all these extra services that don't do me any good, I don't
    have it installed.

  • by kimvette ( 919543 ) on Wednesday March 26, 2014 @02:13PM (#46586067) Homepage Journal

    > 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?

    They don't "let" Netflix do it. It's netflix's right to do so and the movie studios tried to stop them, just like they tried to stop VHS and Beta rentals when VHS gained traction in the late 70s/early 80s. The reason DVD and Blu-Ray remain so popular is that people want to OWN what they buy - they don't want to "license" it on a per-platform or per-device basis (which is why DIVX died), and they don't want the movie to disappear when the "seller"/"licensor" goes under or simply decides the business isn't profitable off and exits that industry vertical. I'm sure most consumers do not think it through that carefully but have a vague notion of the possibility.

    And if they do buy a copy of the movie and want to take it to a friend's house and find that they cannot, then they learn and go back to physical media (or to unencumbered, ad-free "pirate" torrents).

    And yes, you do OWN that copy you buy. Even the movie producers acknowledge this in advertising: "Own it on DVD or Blu-Ray today!!" They are very consistent about this, and it's known by them as well as thinking people that you OWN that copy of the movie (or album, or whatever) just as much as you OWN any book you buy- you're just forbidden from violating their exclusive distribution rights granted to them as the copyright holders through copyright law (or by contract with the actual copyright holders again via copyright law).

  • contracts.... (Score:5, Insightful)

    by jythie ( 914043 ) on Wednesday March 26, 2014 @02:15PM (#46586087)
    The author is looking at this from a tech geek perspective, trying to find explanations in terms of mathematical or technological influences.

    The first big flaw is the author is starting with the assumption that DVDs are less convenient then streaming 'for almost all users'. Only about a 3rd of the country have fixed broadband currently, meaning a significant number of people are poorly served by streaming right out of the gate.... so there is probably a bit of social group blinders going on there.

    Moving away from that, I do not think the OP really appreciates how much of a pain in the butt dealing with the contract is. Studios often do not have the simple ability to wave a pen and allow DVDs to be streamed, the original rights were generally not drawn up to include that kind of availability and courts have already decided that 'we have the physical DVDs and stream/rent them out' technical solution does not get around the legal interpretations of streaming services.

    That is not to say there is not politics and price fixing thrown in there, but you really can not skip over these two rather major factors and get a complete picture of why. If nothing else there is plenty of politics involved, studios would probably LOVE to stop Netflix renting out physical DVDs but they are legally unable to prevent that, and control over the order of release of a film is a huge deal to studios (it is debatable how much of it is purely circle-jerking power vs real economic benfit, but most people outside the industry are probably not going to have the background to really know).
  • by passionplay ( 607862 ) on Wednesday March 26, 2014 @02:16PM (#46586109)
    The content companies have won. The brainwashing in the schools over the past 20 years has succeeded.

    We have a 1770 word essay why ownership of media is clunky and why it is ok to keep paying to watch shows for entertainment. Have we really come so far from the concept of sharing and owning media that we now have to subscribe to "physical media" = bad -> We should always just stream?.

    Streaming inherently disavows your right to own media and to make it your own. The end is at hand..

    Streaming should be an OPTION. DVD's should be an OPTION..

    ##AA Stooges should not be allowed to post such rubbish. And those that are now brainwashed should submit to de-programming..

    Otherwise we are destined to give away our right to creativity
  • by aussersterne ( 212916 ) on Wednesday March 26, 2014 @02:16PM (#46586117) Homepage

    front page of Slashdot. Of course this is price discrimination. Charge what the market will bear. Segment your users accordingly. Maximize revenue through each avenue, carefully ensuring that you match value offered to segments to pricing, etc.

    This is not a story, this is marketing 101—it's what every marketing-driven organization (basically everyone in the modern economy) does, and the bigger they are, the better they do it.

    It's not that any of this is wrong, it's just not newsworthy. We could write the same piece about any number of consumer goods companies, SAAS platforms, etc.

    I guess my response to this is: "Yes. And?"

  • by Bill, Shooter of Bul ( 629286 ) on Wednesday March 26, 2014 @02:18PM (#46586143) Journal

    Yeah, this. its obvious if you know the law, or have been paying attention to the industry. This whole article is pretty pointless. Its all about first sale & licensing, not price discrimination.

  • by Vokkyt ( 739289 ) on Wednesday March 26, 2014 @02:19PM (#46586155)

    Interlibrary Loan can get you pretty much everything with similar transit times to Netflix DVD shipping.

  • Re:Its the law (Score:5, Insightful)

    by jandrese ( 485 ) <> on Wednesday March 26, 2014 @02:20PM (#46586169) Homepage Journal
    This. The reason Netflix was able to build an empire on DVDs is that they didn't have to ask permission from every studio to do it. They just bought the DVDs and put them in the mail. This is also why the streaming selection sucks, because media companies wrote the laws for streaming, and Netflix has to put their balls directly in their hands and ask how hard they want to squeeze. The situation won't improve without a major overhaul in copyright law, which is absolutely not going to happen anytime soon. If anything, Congress will make the laws even more restrictive/stupid because that's what they're getting paid to do.
  • by Drewdad ( 1738014 ) on Wednesday March 26, 2014 @02:22PM (#46586199)

    "they already allow Netflix to "compete" with the studios own DVD sales by offering physical DVDs for rent,"

    The studios do not allow it. The law allows it, because the law allows Netflix to rent physical DVDs that it has purchased.

    The media companies would love to be able to block Netflix, lending libraries, etc. but the first-sale doctrine prevents them from doing so. []

  • by DerekLyons ( 302214 ) <> on Wednesday March 26, 2014 @02:25PM (#46586237) Homepage

    "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."

    Bennett, that's because you are an idiot.

  • by Radical Moderate ( 563286 ) on Wednesday March 26, 2014 @02:25PM (#46586243)
    I agree. I deal with a lot of software publishers, and most of the old-timers are terrified of "the cloud". Want to run an app on a terminal server instead of installing on a couple hundred desktops? Get ready for a long discussion with Legal. More companies are starting to get it, but there are still a lot of holdouts. I expect content providers are the same: sure, they'll let you stream their old crap that's just clogging up the bargain bins, but there's no way they'll expose their shiny new releases to the horrors of "the cloud". It's a control thing, or rather the perception of control.

    I'm not saying that's the only reason, but I expect it's a factor.
  • by transporter_ii ( 986545 ) on Wednesday March 26, 2014 @02:26PM (#46586249) Homepage

    Yes. Netflix can rent physical DVDs without negotiating with studios or distributors. In theory, they could run to Walmart and buy DVDs to mail out. They need nobody''s permission to do this. With streaming, they are at the mercy of the studios. Studios who want to offer their own streaming services.

    The death of DVDs could equal the death of Netflix. It may or may not play out like that, but DVDs have been very good to Netflix for the simple reason of not having to enter into any agreements to do their core business.

    There are any number of entities that would love to see Netflix fold. The way to do that is through license fees. They can turn the screws.

  • Re:Of course (Score:3, Insightful)

    by operagost ( 62405 ) on Wednesday March 26, 2014 @02:36PM (#46586375) Homepage Journal
    This is not an intellectually honest answer. Netflix is offering both the inconvenient "old" method and the "next" slightly more convenient method. Obviously, there are separate groups of people who are willing to trade price for convenience and vice versa. The two methods aren't both offered in the hope that you'll rent the DVD, then stream the same movie you already rented. In both instances, it's understood that you were only renting it for a limited time. You didn't "buy" media.
  • Re: tldr (Score:4, Insightful)

    by 93 Escort Wagon ( 326346 ) on Wednesday March 26, 2014 @02:57PM (#46586593)

    VGA cable + Audio Patch Cable + Capture Card = rip almost anything.

    Yeah that'll look great on your 70" 1080P television.

  • Re:tldr (Score:5, Insightful)

    by Anonymous Coward on Wednesday March 26, 2014 @03:00PM (#46586625)

    It's not about what content providers are worried about, it's about what content providers have control over. They can't do anything about Netflix buying DVDs and shipping them out. But they can control Netflix's streaming their content, even if there are artificial limitations like the ones suggested. As long as content producers are given a say in the matter, they'll say no to anything that makes Netflix a "one-stop shop" for customers to get their content. Sure, they'll license a part of their catalog to Netflix to stream (mostly TV), but they don't want their full catalog available online. It's an obsessive control thing, not a fear of piracy. Piracy has always been a red's always been about control.

    And it's about content producers being short-sighted, just like they have been all along. The best thing that could happen to both Netflix and the content producers would be to introduce compulsory licensing fees ala what CARP set for streaming music. The industry as a whole needs to move away from the notion of maximizing their profit on a per-view basis and move to a strategy of maximizing their per-user, per-month profit. If the average person spends $x/mo watching media, be it TV, movies or whatever, the goal of the industry should be to raise that number and they should be willing to give customers unlimited content as the carrot for paying more. That way, everyone wins.

  • by AudioEfex ( 637163 ) on Wednesday March 26, 2014 @04:19PM (#46587243)

    This is the single stupidest, most presumptuous, idiotic thing I have ever read on /. that wasn't in the comments section - and it still vies for the top spot, even including them.

    I started to write a complex response, but then realized that it would be asinine to give this drivel that much of my time when I can sum it up very easily:

    Asking this idiotic question and not realizing the dozens of factors from quality (1080p streaming does not = 1080p Blu-ray, unless you are watching all your content on a tiny laptop screen), to the fact this AYCE streaming-world is mostly unique to the US and won't be sustainable here once Internet caps are in place for most folks (which anyone who follows such things knows is coming), and everything in between, is akin to someone posting an article saying, "Why doesn't everyone just cook with a microwave since it's the simplest, most convenient way to cook food?"

    Though, it should have been obvious the writer was a tool from the first sentence - if you are idiotic enough to buy a laptop from Best Buy of all places, you don't have much sense to begin with.

  • Re: tldr (Score:5, Insightful)

    by bzipitidoo ( 647217 ) <> on Wednesday March 26, 2014 @04:25PM (#46587313) Journal

    I haven't stayed current with DVDs, and haven't even tried Bluray. Have a Bluray drive in my computer, but it has never had a Bluray disc in it. Consequently, I have found the copy protection of recent DVDs not so trivial. I don't use DVDs any more myself, and this copy protection crap they pull makes me less willing than ever to get back into DVDs. It's a pain to read up on how they've screwed with DVDs in recent years, and track down the means to handle it when I try one and find it won't play on my Linux box. Only reason I even mess with it occassionally is for friends.

    DeCSS and removal of region encoding isn't enough any more, have to deal with crud like this ARccOS protection. There are intentionally corrupt sectors that confuse old school DVD ripping software, fake titles that DVD players overlook as intended because their size is below the DVD standard's lower limit but which are picked up by DVD drives and software in computers, and corrupt video files with sizes set to 0x0 width and height, and lengths set to 0 seconds, and I think some screwing around with colors as well, to cause blank black screens. There's not much on Linux to handle that. MakeMKV does fairly well, but can't always produce files that can be burned to DVD. But I've heard the best software is AnyDVD, which is Windows only. Haven't tried it.

  • by hairyfeet ( 841228 ) <bassbeast1968 AT gmail DOT com> on Wednesday March 26, 2014 @05:54PM (#46588181) Journal

    Its because we don't all live in NYC or LA and therefor don't have endless bandwidth?

    I guess the author lives in a bubble and has never left his little comfy megacity but in the rest of the country? yeah you see we have these things called "bandwidth caps" that can be as low as 35Gb, that is if you can get high speed at all.

    You see thanks to having a broken corrupted system that has been on the skids for quite awhile there is a nice scam where there is no competition in a good 70%+ of the country. In those places you get a DSL system that has been practically abandoned (because the phone company is making mad bank of those cell towers and could give a fuck about those old DSL setups, can't nickel and dime them to death like the mobile customers) and if you are VERY lucky you can be assraped by cable which is very fast but raises your rates every time someone gets tired of their jacking up the prices on movie channels. Oh and BOTH sides cherry pick and really don't give a fuck about poor or non whites so in many places you can have cable and/or DSL literally across the street and not be able to get anything but dialup. Racism and classism, don't ya just love it?

    So to kill DVD would be to kill a good chunk of their sales as many just can't get high speed or have such high caps that they would have the choice between watching a movie or having dinner thanks to the insane overage charges. Blu Ray looks to never be anything more than a niche, in fact the people I know with BD players use them more for DVD than they do for BD, so like it or not oh sheltered writer of TFA the DVD is gonna be here for a loooong time.

  • by u38cg ( 607297 ) <> on Thursday March 27, 2014 @05:14AM (#46591061) Homepage
    I've developed a certain sensitivity to Bennett stories: if the summary asks a stupid question that can easily be answered with a little thought, I check the submitter's name. Bingo. In this case, the answer is legacy business and the difficulty of negotiating contracts across publishers. End of story.

"In matrimony, to hesitate is sometimes to be saved." -- Butler