Rental itself was born in a physical era. Yes, we can accommodate rental on a digital exchange basis, but it is not a magical talisman. In order to rent a copy to its customers, Netflix owns copies. Netflix is simply a library, no different from the one in your neighborhood. It buys stuff. It lends it out. Streaming is just one of several ways to distribute the content to the borrower. The point is that we need to account for each copy and keep track of who is a Verified Accessor of that copy so that the person who is the Verified Accessor can have his or her access switched on when they go to the cloud to stream it. When the Netflix movie is returned to Netflix then Netflix is the verified accessor until the next time it is rented out.
And now, Lefsetz:
For those who say people will never rent music, remember people rented videotapes, bought DVDs, rented DVDs and now stream movies. Don't tell me what the people want, they don't know. Furthermore, what made streaming so appealing was two breakthroughs, Netflix-compatibility in television hardware and the iPad. Yes, imagine if the music industry had enabled tech innovation instead of thwarting it, maybe it would have been prepared for the future.
In case you've been under a rock, yesterday Netflix split streaming from renting, instead of one low price you got a whopping increase if you still wanted both. People are complaining, but as stated above, what is their alternative? They could go back to buying DVDs, but that's still a bad deal compared to Netflix. As for renting, where you gonna do it? The video shop has evaporated and yes, we've got coin-operated rental machines, but inventory is limited and you've got to leave your house.
So I'm laughing. It's the cheapskates revolting.
But they've got an alternative, streaming.Unfortunately, the movie business is leading.
The music business could have killed the CD, could have driven people to subscription, but afraid of the future and wedded to the past it refused to do so to its detriment. We'll see what happens now.