Friday, June 18, 2004

Netflix isn't holding out on you

Wednesday, November 27, 2002
By Alan Cohen

In its four years Netflix has tweaked the inventory-management software so that new orders are automatically generated even as the old orders are returned, and all 12 distribution centers can be polled before a customer is told that the movie he wants next is out of stock.

Of course, we have 29 distribution centers now. I propose the following theory:

Short Wait: means out of stock at your local distribution center (maybe they can make more copies)
Long Wait: out of stock at all of your regional distribution centers (and they can't make any more copies)
Very Long Wait: out of stock at ALL distribution centers nationwide (they definitely can't make any more copies).
Very Long Wait and Out Of Print: Their deal with the studio forbids them to purchase or release any more copies.

It has made revenue-sharing deals with 50 film distributors (including most of the major studios), giving it its large inventory of 12,000 titles, dwarfing the 7,000 to 8,000 available at Blockbuster's largest stores. (That does come at a price: Netflix shared 19.2% of its subscription revenues with partners in the second quarter.)

This is the first place I've seen an actual figure given for the percentage of revenue sharing Netflix is doing. All of the legal documents (go to and search for "Netflix") have that information hidden (confidentiality requested).

Reed Hastings wants you to rent more discs from Netflix:
"The people who watch just two movies a month may realize that they don't use us enough to justify the price." So he has steadily been investing time and money to boost rental rates (the average Netflix customer rents five movies a month).

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