Yeah, I guess that is a simpler form of the same question.

I asked the question the way that I did because I designed my idea to be as close as possible to the existing DVD-by-mail situation, so that people couldn't nit-pick differences between the two scenarios. But it's essentially, "Why don't the studios let Netflix stream the titles that it currently only offers by physical DVD, for some amount of money that could be split between the studios and Netflix?"

A more puzzling fact is that if you search for a movie on Netflix streaming and they don't have it available for streaming, nothing comes up. That would certainly seem like a case where they're just leaving cash on the table, since if they offered the user the chance at that point to stream the movie for $4.99, at least some users would take it. As it is, the user either just streams something else, or goes to a different service like iTunes to buy what they wanted.

Yes this could be an explanation for why there is no streaming of older content that was made before contracts were written to take streaming into account.

However, for more recently made movies, when everybody knew about streaming when the movies were made and the contracts were written, it doesn't explain why the studios release those movies as physical DVDs for Netflix to mail to people, but not as "virtual DVDs" that they could sell to Netflix for the same price, and that Netflix could then "check out" to people.

My wording was unclear; what I meant was that for the movies that Netflix has available on DVD (but not available on Netflix streaming), it's much more expensive to stream each of those movies if you buy/rent it from Google Play or iTunes, than it is if you just queue them up and have them mailed to you through Netflix. So that's possibly how the studios are price-targeting people: If you're willing to go through the inconvenience of queueing up movies, waiting for them in the mail, and then watching them on a clunky old 20th-century DVD, you can watch all those movies at a pretty cheap cost per movie. If you bought or rented those samne movies on iTunes it would cost much more.

Right, nothing I've said would apply to the people who already let their stuff be streamed on Netflix.

I'm only talking about the cases where studios only allow the movie to be mailed out on a physical DVD. Why don't they allow the same movie to be "checked out" on a "virtual DVD", under the same terms? (Netflix has to "buy" the virtual DVD for the same price as the physical DVD, users are capped at 20 "virtual DVD" rentals per month, etc.)

Yes this was actually one of the answers I came up with in the original original article:
http://news.slashdot.org/story...
that maybe they didn't allow virtual DVD checkouts because it competes with the impulse buys.

So then I wondered: why don't they just allow "virtual DVD" checkouts with a delay imposed between the time you check out the movie and the time that you can start streaming it? That would avoid competing with the impulse buys, and it would work "like the DVD by mail service", except that it wouldn't require the user to deal with clunky physical DVDs.

One possibility is that people would then blame Netflix for the delay and resent them for it. Whereas when Netflix mails you the DVD, people blame the mail service for the DVD and maintain happy feelings towards Netflix.

OK, but then why sell physical DVDs in a cooperative agreement to Netflix at all, isn't that also undermining their sales of streams? Why don't they make it difficult every time for Netflix to acquire their movies, the way they did with John Carter?

In other words, the question is, why do the studios allow users to "check out" a fixed number of premium movies per month (about 20) via DVD-by-mail, but don't let users do the same thing for streams. The answer can't simply be about undermining their iTunes stream sales, because both the DVDs and the "virtual DVDs" would undermine the iTunes stream sales.

That is a good point, but unfortunately it doesn't work as an answer to the question, because even if the original agreement is at gunpoint, it doesn't explain why both parties don't agree to replace it with another agreement that makes both sides more money.

Imagine the dialog:
Netflix: "We'll give you $20 per DVD and rent them to our users, let's just make it a cooperative process to reduce the hassle, otherwise we'll just go out and buy them at retail and do the same thing." [cocks gun]
Studio: "*sigh* fine. But as long as we're doing that anyway, why don't we also sell you some 'virtual DVDs' which you agree to only 'check out' to one home user at a time, with a cap of 20 monthly 'virtual DVD checkouts'. The total gross revenue from users will be more, because we'll rope in some additional users who wouldn't want to deal with physical DVDs."
Netflix: "Sounds good."

That would bring in more money, and that's what makes it an interesting question as to why they don't do it.

That's an interesting theory. It certainly could explain why some old stuff might not be available for streaming.

On the other hand, the explanation wouldn't work for any movie made after the advent of streaming, since surely at the time that the movie was made, they could have written clauses into the contracts to cover that.

Well obviously I don't mean "Why doesn't Netflix just barge ahead do this without the studios' permission?" What I mean is: Why don't the studios allow Netflix to stream movies to users under the same terms that they mail the physical DVDs to users -- so you're capped at, say, 20 per month, and Netflix still has to pay the studios for the "virtual DVDs" that it "checks out" to users. So everybody still gets paid, and Netflix and the studios would theoretically make more money, because they'd make additional revenue off of users who won't sign up currently because they don't want to deal with physical DVDs.

Obviously, I don't mean to imply that Netflix and the studios haven't thought about this. What I mean is: assuming they have thought about it and decided not to do it, what is their reasoning? There's no obvious answer as to why they don't do this, since it would enable them to make additional money off of people who don't want to deal with physical DVDs. My best guess was that it's a price discrimination tactic (where DVDs are the deliberately inconvenient option targeted at price-conscious users, while less price-conscious users just buy or rent the same movies online, which costs more). There may be other possible answers.

What I mean is: Why don't the studios let Netflix stream the movies that are currently only available as physical DVDs, under the same plan that applies to physical DVDs? In other words, you only get to stream 20 "premium" movies per month (where "premium" refers to the selection of movies that are currently available as DVDs, but not on Netflix streaming). So you get access to the same movies, at the same rate, and the studios and everybody else still gets paid the same money -- but users don't have to mess with clunky old DVDs, instead they can watch the movie on any device they want.

OK then just replace this sentence: "That would only explain why they overprice their services, not why they do it in a confusing manner" with the following: "That would not explain why they price their services in a confusing manner."

In other words, regardless of whether their services are overpriced or not, why do they sell cheap phones that lock you into a two-year contract to pay them off via an inflated bill for the cell service, rather than selling a phone for a flat price (which you can pay on installments if you want to spread it over two years), and selling the service separately? What's an explanation that is unique to the cell phone industry? (And would explain why, for example, the laptop industry doesn't do the same thing.)

OK. But once they had a monopoly, they just charged a lot for their products, instead of doing something silly like signing people up for monthly contracts that turn out to be more expensive than people expect.

So the cell phone companies' behavior can't simply be explained by the fact that it's a monopoly/oligopoly. That would only explain why they overprice their services, not why they do it in a confusing manner.

I think all of this is true, it's just not clear why this happens in the cell phone industry in particular but not in other industries.

If it's an oligopoly without effective competition, why don't they just jack up the prices and screw us over that way? Why play the numbers game? It seems like it can't just be "to fool people", because surely most people aren't fooled any more after they get out of their first two-year contract.

On the other hand, if, as you posit, there are enough companies for there to be real competition, why didn't anybody (before T-Mobile) decide to compete by offering clarity on the device and service plan pricing?

Maybe the answer is that the market just moves a lot less efficiently than it's supposed to, and so the natural result was that eventually a company would break ranks and offer clear pricing, and the others would have to start doing that to compete -- it just took a long time.

The problem with this "explanation" is that if the companies wanted cash to expand, why not just charge full price for the phones and charge for the service separately, and then give people an installment plan if they can't afford the phone up front? Surely even "stable cashflow" over two years, is not as good as *cash up front*.

The answer also can't just be that they got away with it because they're a monopoly/oligopoly, because then they could just jack up the price of the phones and screw people over in a more straightforward manner. It doesn't explain why they had to do it through funny math and confusing pricing - or why other companies like Microsoft, with pseudo-monopolies, don't/didn't do the same thing through funny math -- they just charged a lot for their products.

That's a very interesting explanations. It fits all the facts and I can't think of any loopholes on it. Could that be the entire answer?

Although, it doesn't explain one thing -- why the carriers didn't just encourage you to pay full price outright for the phone, and then go month-to-month for the service. (You could always do this, of course, but companies like Verizon didn't give you a discount on the month-to-month service even if you paid outright for the device, so the choice made little sense.) Surely having you pay the entire cost of the device up front, is preferable for them than having you enter into monthly installments.