Netflix got it right. Will the Studios follow?

In trying to legally consume digital movies, there are two models: the Netflix way and everyone else. Let’s start with the latter.

If I want to watch a movie online (streamed or downloaded), I can go to Amazon OnDemand, iTunes, XBox Live, Vudu, and Sony’s PS3 platform. These are all generally the same: the selection varies from about 5,000 movies to 30,000 titles. I can download or view a DRM-restricted 24-hour rental (the download sits on my hard drive for 30 days but once I start playing it I have 24 hours before it “expires” and becomes unplayable) for $2.99 – $5.99. Or I can purchase a DRM-protected movie for $12.99 – $16.99. The DRM protections render the movies completely non-portable (I cannot take them with me, unless bought from Apple and used on an iPod). While that is not consumer friendly, the 24 hour expiration window is pure customer cruelty. Note to studios: why not just make the rental simply play once within, say, 30 days. Why must I finish watching in 24 hours? Just silly, really, and clearly meant to penalize those of us who have kids and/or work hard and have limited windows at night to watch TV. Can’t finish in 24 hours, TOO BAD! Buy it for $15, dude!

Or, you can join Netflix and come over to the good life. For $8.99 a month, you get one DVD sent to your home at a time, chosen from more than 100,000 movies. You get a fantastic queue system which allows you to essentially pre-order a rental as soon as you hear about a movie (long before it is even released on DVD). And now you can, at any time, as often as you like, stream more than 20,000 movies to your computer or TV (using a $99 Roku box). I am living in luxury folks. I can watch each movie as many times as I like, and take as long as I want to watch it. This is a company that understands and indeed caters to consumers’ needs.

I know the studios hate the model. Studio execs have told me they would be “out of business” if every service worked this way. But the adoption of the other models is paulty compared to Netflix’s. They have more than 10M subs and are growing like a weed. They are best positioned to migrate consumers into the digital movie world, because they can satisfy our need for vast selection with their physical/digital hybrid model. And they make the restrictions appear invisible. (True, no portability. But with WiFi on a plane, we’re getting there.)

Once again, I think the way to navigate the digital world is to remember that the consumer is in control. To win, you must satisfy them, not penalize them. (Last week’s studio idea: remove the bonus features from DVDs that are used as rentals in order to make people buy more full-featured DVDs. Um, good thinking.) It’s just too easy to steal, so better to offer me something superior to the stolen good.

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