Our take...
Warner's new release holdback is designed primarily to help shore up the retail video market in the US, where Screen Digest data shows combined unit sales of DVD and BD fell by 9% year-on-year in 2009. By delaying the availability of new releases via Netflix's DVD rent-by-post service, the studio hopes to maximize sales of new titles in the first four weeks on release which, according to Warner, typically account for 75% of disc sales.

The window is in line with that which Warner and several other studios imposed on DVD rental kiosks in August 2009 – which market leader Redbox is currently battling in court – but Netflix claims its deal with Warner is the result of a pre-emptive strike; that the company proposed the 28-day embargo to Warner over a year ago in return for improved terms.

The increased new release copy depth Netflix has negotiated will enable it to reduce customer waiting times for these titles, while the discount will allow it to invest further in its streaming service – Netflix has already leveraged the retail window to extend its streaming deal with Warner to include crown jewels in the studio's vault, such as the Matrix trilogy. The company argues that its online DVD rental business is considerably less reliant on new releases than traditional bricks-and-mortar or kiosk rental and it can therefore afford to accommodate the four week window. However, Netflix needs content at the head to drive consumption for its long tail and could find itself under pressure if the studios team up, as they have in the kiosk market, to drive a harder bargain.

Separately, it has been reported that Disney is planning to revise its online licensing terms with cable network Starz, from which Netflix sublicenses content for its streaming service. Industry sources suggest Disney may attempt to impose a premium for online syndication when it comes to renew its deal with Starz in 2012. Starz currently accounts for about 15% of the Watch Instantly library but crucially this includes more recent Disney and Sony titles in the pay TV window; much of the rest of the Netflix streaming catalogue falls in the later subscription window. Consequently, the Starz portion of the Watch Instantly catalogue accounts for a disproportionately high amount of consumption.