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.
They don't do it because the lawyers didn't see it as any different from their current streaming, that is, it would require a license. Since the license is the stumbling block for Netflix's sad lack of older streaming content, I'm not seeing how these shenanigans would help.
Form what I hear, the big problem for streaming license for older works isn't even the price negotiation, it's that the contractual rights are unclear for everyone involved in making the movie, when it comes to this new form of revenue.
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.
There certainly isn't some scheme by Netflix to offer DVDs to price-conscious users, since DVDs are so much more expensive to the end user than streaming, unless you only watch a couple of movies a week.
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.
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.)
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.
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.
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.
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.
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.)
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.
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 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.