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| Written by Bruce Frigeri | ||||||
| Wednesday, 03 June 2009 | ||||||
 A recent article in Home media Magazine highlighting the current state of Netflix includes a fascinating detail about Netflix customer rental habits. According to a recent study, 75% of Netflix business is for "catalog" titles. Generally speaking catalog refers to films that have been in release for at least three months. A couple years ago it would include titles in release for at least a year but times have surely changed to limit the definition. Either way, this term clearly doesn't apply to those new releases streeting in a given month. If this study is accurate, it reflects a consumer preference that flies in the face of wholesale buying patterns for both rental and retail which are disproportionately skued towards new releases.There's always room to manipulate terms and definitions to help generate a preferred response, but these figures sure do look a lot like the buying patterns of dvd consumers from five or six years ago. Back then it was possible to place an attractive title in Tower Records or Borders and watch it slowly churn its way to respectable sales. As we've discussed before, those days are long gone for independent releases (as are Tower Records and much of the audio/dvd floor space at Borders). Brick and Mortar rental chains like Blockbuster have become almost completely dependent on new releases to drive their business. Even Netflix puts a clear emphasis on new releases. As I write this, five of the seven rotating banners on their home page support new releases. And yet 75% of their business if for catalog? How would that make sense? There's a couple ways to explan this. The first is that Netflix is selling space in those banners and new releases are much more likely to come with ad dollars than catalog titles. So in effect the content of the banners is not necessarily reflective of where Netflix does the most business, but rather what their suppliers want to emphasize. The second explanation has to do with with an idealized, and maybe accurate, description of just what kind of film the average Netflix subscriber wants to watch. In short, they value good films. Even though most new releases throughout history have been middling to poor, the discerning dvd customer is still able to pick through the flotsam and jetsam of the past thirty to forty years of cinema and find plenty of quality films to rent. It becomes a zero sum game of sorts with every rental of a catalog title depressing the overall rental volume for new releases. If we take a step back and contrast the best films of the pat forty years against the best films of the past three months it becomes even easier to see that this survey just might be accurate. The relatively unlimited inventory capacity of Netflix clearly enables them to appeal to their customer's interest in catalog titles much more easily than a cash strapped Blockbuster or Hollywood Video ever could. Factor in a tough retail environment and the relative affordability of renting a catalog title instead of buying it and the results of that survey become downright obvious. The future of retail distribution could very well render even a Netflix obsolete. But for the present they are clearly kings of the hill, offering a mix of new releases and catalog titles that more and more consumers value. The discerning dvd consumer didn't disappear along with Tower Records and Musicland, they migrated to Netflix.
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