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badass

Yeah, I read this on Fool.com today and I totally agree. Hastings has said this before and it makes sense. Yet, I also think that the first company who does it will gain plenty of subscribers quite quickly. One one hand I don't want NFLX to do it because I don't want to see them lose capital, but on the other hand I don't want a competitor to be the first to offer both games and dvd's throught the mail in a wide market. So I think NFLX should stay out of games unless another competitor does it successfully after their own trial. It's a copycat stragety but it would be smart.

sMoRTy71

From Netflix's perspective, it may not make sense; however, it would be great for consumers.

I demoed GameFly and absolutely loved it. I just couldn't justify adding another $21 subscription on top of Netflix (and everything else I subscribe to).

Aron

There's no reason to think that games won't eventually be added. It's a matter of timing. I support Netflix's decision to avoid games for now. They need some breathing room in the movie biz first.

Aron

BTW, I don't think a rental cap is as useful with games as it would be with movies. Rental caps reduce the postage expense primarily, as they reduce turns. Movies would turn less.

The key, I believe is a lower # of items out for the price point. When the merchandise costs more, the opportunity cost of having extra selection at home just in case you want it is higher.

Netflix could beat the GameFly price points by allowing all users on game plans to also rent movies which are theoretically less expensive, therefore Netflix customers should be less costly. Given Netflix's quicker shipping though that might wash out..

A lot of people arguing against games have implicated the longer average hold times when compared to movies. I believe this fact is actually beneficial. If users hold games twice as long, the thinking goes, Netflix will need twice as many copies. This is incorrect in my opinion. The deceptive twist is that there are a limited number of items allowed out, therefore holding one prevents you from holding another. Therefore, your desire to hold Game A for a long time prevents you from holding Game B for a long time, etc. It all balances out. And Netflix doesn't care as long as it has all of its inventory in the hands of users rather then sitting on a shelf. So in this aspect it is a wash. Longer hold times, on the other hand, result in undisputably lower postage.

No, the key problems are price of the game and shorter lifespans. These are covered by a more expensive service and\or worse selection and availability. These items make the business tougher to serve well and create a good reputation.

Aron

"Rental caps reduce the postage expense primarily, as they reduce turns. Movies would turn less."

*Games would turn less.

REN

I've actually considered most of these points and I agree that a person would have a game out much longer than a movie. A plan with a cap of 4 games a month, along with movie rentals would be a nice.

But, If you use the longer hold times to be a practicial cap, what about those people who would rip games? I'm not up on the new gaming systems, but isn't it possible to make copies of games? It probably isn't a widespread as it used to be due to new copyright protection and systems like the XBox requiring modification, but these hacks spread and new breakthroughs come that make it easier to pirate.

CashForFlow

Piracy is a problem in both movie and game rentals. How it is a different sort of factor for game rentals I don't see.

C

Does Netflix sell DVDs that aren't renting anymore? (And how could we get them?)

REN

Well, I mentioned that. Renting games has a lot of drawbacks, and there has to be some benefits to balance them out. One of the positive aspects is that a person rents a game and tends to keep it for a longer period (assumption) because it has a high replay value (compared to movies).

Instead of renting 15 movies a month, a person rents games and keeps some games out for a week or two keeping their monthly total rentals lower than if they had rented all movies.

This positive is negated if a person is renting games as quickly as possible and burning them. It also keeps a person from renting a game they enjoyed at a later date because they now have their own copy.

REN

I don't think Netflix has anything like that. I don't think they are in the same situation BB is in. I'm assuming that BB gets its second hand movies from their stores. In the stores they buy 50 copies of the hot new release and months later have to get rid of some of them.

REN

One other thing, I just can't imagine games being a viable option if Netflix has to spend $40 a piece of them.

There are a few hot titles at a given time, and it would be hard to sell older games. It would give rise to a situation like BB has in its stores where they buy 50 copies of the latest hit movie and then have to get rid of them months later. NF would have to have tons of copies of popular games to satisfy users. Users might rent the popular game, like it, and then buy it, taking away the future market for that secondhand game when NF tries to sell it off. At this point the game is no longer popular, and may even be obsolete. Many people who bought the game when it came out will be trying to sell their copy at this point to get money for the newest hit games.

Movies tend to retain their value. People rent a lot of older movies, but how many people want to rent 'Madden 98' for the SNES?

Ren,
Netflix spends more than $40 on their high requested fillms. dont forget for new releases they pay a premium per rental whcih will total more than $40 per disk.

also with the exception fo a few critically acclaimed andfilms and chilrens titles almost all dvd's are worth just a few bucks after a year. so they decline in value just like games.

You are just wrong saying movies tend to retain their value. they drop like stones. you mentioned madden 98. how many people want to rent or buy Karate Kid 2? Pokemon 7?

just look on ebay there are thousand and thousands of original non-bootleg film titles you can buy for just a few bucks.

REN

Well, there are a lot of ways to look at it. You can just consider popular titles. I don't think NF is going to buy a bunch of a movie title that isn't popular. I think the popular movies retain their value at least through the time period during which a format (DVD) exists. For games, people tend to focus on the new hit game, and older games, especially in a series (GameX 2003), lose their value (again, assumptions). You also have to consider the lifetime of a game system. How many years will people be renting X-Box games?

I don't know about purchasing prices or agreements. Why would they pay $40 for a movie though? It isn't like they have an exclusive deal or get the movie before anyone else. Also, the quote from the article; "Second, Reed mentioned that at $40 a pop, dealing with video games is tricky business." lead me to believe that $40 is a high price compared to what they normally pay.

KW

Netflix only pays for 80% of its DVD movie inventory. It has revenue sharing agreements with the studios. Why couldn't they do the same thing with game makers? (i.e., offer them money each time a game is rented. It would probably increase their revenue stream from each release.)

Tim

Not sure about the economics of renting games. I think, though, that the disks themselves would wear out before they became obsolete. We have had a couple of bad movies sent to us, but they must replace their DVDs alot to prevent this from happening more often.

On the other hand, I think people would rent the best games and keep them for weeks. Games are addictive.

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