I just added a bunch of movies to my Netflix Streaming Queue. A few of them I’ve seen already but will enjoy watching again.

Much has been said about Netflix’s lousy selection of movies, and I suppose it’s true. However, I think only the extremely myopic could fail to notice one thing: Netflix is the only big player in the streaming movie business that isn’t gouging its customers.

I pay $8 a month for access to thousands of movies. Sure, they’re not all A-Listers, but that eight bucks I pay grants me 24-hour access to watch all or part of each of them whenever I want without restriction. That’s a good deal.

For comparison, I paid Amazon Video on Demand over $35 just in the last two months to watch just a handfull of movies and have had to watch the ones I “paid for” within 48 hours. That’s a bad deal, and here’s why:

Streaming a movie over a wire costs a lot less than producing and shipping a DVD or a Bluray. Managing the bits over a wire is probably less than one tenth as expensive, but it could be much lower. Even if you want to quibble with my math, which is obviously not the result of an exhaustive statistical analysis, you have to see that bits over a wire changes the scenario in profound ways.

The streaming method allows for no possible way for damage to be done to the movie. That means a great deal of the risk inherent in managing physical products simply evaporates.

One of my favorite industry terms is, “shrinkage.” It basically means theft, but it also covers fraud and error. And it’s a huge problem in retail. According to a study Ernst & Young conducted, U.S. Retailers lost approximately $31 Billion to shrinkage in 2002. The term is evocative, I think. One can easily see the usefulness of the notion of physical inventory shrinking without being properly paid for. With digital goods, there is no shrinkage. Even if “theft” occurs, the inventory never shrinks.

The cost of housing all those physical copies, the rent on the building, the cost of driving them around, the long chain of production facilities needed to produce and package the disk: all gone.

No longer does this business require that the popularity of certain movies be forecast; nor does this business ever have to account for the losses involved in purchasing too many or too few copies to match the poorly predicted demand.

Because digital storage and delivery shifts the distribution related limits into the elastic realm of virtual servers, whoever has the bandwidth to connect can watch the movie. Limits to the number of people who can be served have effectively vanished.

The concept of a timed rental arose out of a proprietor’s need to get the movie back so as to rent it again. If any one client kept the physical copy too long it would directly jeopardize the transaction’s profitability; hence the “late fee.” This simply does not apply to a digital copy of a movie. It makes no difference at all how long the purchaser takes to consume a digital product. The proprietor can distribute without limits. Amazon and others expect you will not realize this. They assume you will obediently pay for a limitation imposed by the failings of a physical good on a completely unaffected digital one. And so far, it seems they are right.

They would be wrong and this would be obvious to you, probably, if it weren’t for the memory of the old way of doing things still fresh in your mind. It is so hard to move beyond our habits. But if you could, you would see that such a fee makes about as much sense as a “convenience fee” on show tickets that no longer burden the distributor with the cost of printing or shipping. Oh yeah, we’re getting screwed all over the place.

So maybe one or more of the movies I list below will help you set aside your burning desire to consume the latest that Hollywood has to offer, while patronizing one of the few big companies not aggressively trying to screw you sideways.

Everything Must Go
Being John Malkovich
Persona
Pi
Memento
Chinatown
A Clockwork Orange
Following
Videodrome
The Others
Eternal Sunshine of the Spotless Mind
The Skeleton Key
The Game
Donnie Darko
Revolver
Snatch
Lock, Stock and Two Smoking Barrels
Cypher
The Little Girl Who Lives Down the Lane
The Way of the Gun
The Grifters
The Crying Game
Midnight Express
Bad Boys
Shutter Island

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