Chapter 335： Planning the source

Due to licensing agreements with several entertainment companies in South Korea and island countries, Netflix's film library has been enriched to a certain extent, but the film source is still seriously insufficient.

Compared to now, there were fewer sources of Netflix film sources. Because of many factors such as funding and latecomers outside of Hollywood circles, Netflix's contact with copyright owners at that time was very unsatisfactory and had to find a way to collect film sources.

Among them are a considerable number of very large-scale art films, even reaching the level of prohibition of viewing under the age of 18.

Many of the licenses for these films come from the famous San Fernando Valley.

However, among the art films of San Fernando Valley, they belong to a relatively small scale.

"I hope that this part of the film can be removed." Ronan is not because of any ethical issues, but based on future considerations: "We can get enough licenses this year. There is no need to take this risk."

Since the acquisition of Netflix, Relativity Entertainment has been making preparations in this regard.

Mark Randolph said with a little helplessness: "We know this is risky, but for the previous Netflix, there is no way."

Many companies start their own business and their early development is not standardized, and sometimes special means are used. Ronan was once one of them, so he can naturally understand what Mark Randolph said.

"Netflix has passed the most difficult stage. Let's withdraw now." Ronan said jokingly: "I don't want to be dragged to court in the future and accept accusations of some kind of obscure behavior, and the cause is just somewhere. Prosecutors are falling behind in the polls and want to use this as a pretext to attract attention."

"Okay." Mark Randolph believed Ronan could bring enough film sources to Netflix.

Ronan has learned more about Netflix recently, and he also knows that Mark Randolph and Reed Hastings did a lot of risky measures in the early days of Netflix's founding, some of which were even worse than this.

For example, in order to attract users, Mark Randolph and Reed Hastings put their ideas on Zipperton and Lewinsky, and burned Zipperton’s inquiry and grand jury testimony into DVD on the Netflix website. It was rented for sale on the Internet, and as a result, it attracted more than a thousand new registered users and sold thousands of DVD copies.

This was a successful operation for Netflix at the time, but the political risks involved were great.

In addition, according to the later records of the distribution room, because Netflix had just collected a batch of San Fernando Valley art films at the time, it resulted in delivery errors. Hundreds of customers received DVDs with popular art films. It's not a testimony of the zipper.

Fortunately, the customers who received the wrong film chose to be silent. Otherwise, if someone complains to the regulatory authority, Netflix will face very big trouble.

In the second week of Ronan’s arrival in San Jose, Relativity Entertainment’s second US$30 million fund was in place. Mary led a special person to take charge of the capital increase and share expansion. He didn’t need to be too distracted. The main focus was on cooperating with Netflix’s management. Solve the key issues above.

Netflix plans to expand the "Sky Screen" program that it has promoted before. Customers can become paying users of Netflix by paying a monthly fee of $14.9. They can choose 4 movies per month, and Netflix will be responsible for the shipping costs.

This plan was formulated as early as 2000, but the promotion was not smooth, mainly due to film library and funding issues.

"If there is a large enough film library, with proper promotion..."

In Netflix’s somewhat cramped conference room, all the executives gathered together. Mark Randolph sat on Ronan’s left hand side and said loudly: “The Sky Screen project can bring huge customer growth to Netflix.”

Leslie Kilgore, the head of the marketing department, said: "We are contacting the media."

Ronan then answered: "The head office can assist in the promotion. There is an Internet Propaganda Department under the Embassy Pictures. They have rich practical promotion experience and can promote Netflix on major film and television websites. In addition, I have asked people I have contacted film and television media and portal sites with a wider audience, such as "Premiere", "Variety", "Entertainment Weekly", "Vanity Fair" and Yahoo.com, etc. Relativity Entertainment has had a good cooperation. When Netflix is ​​ready, Netflix advertising will be placed on a large scale."

His words continue: "Netflix also has room to use in the promotion and promotion of the new film on the theory of relativity. I will let someone contact you and negotiate. If Netflix has enough users, I can make Netflix become a big player. The only online rental and seller selling movies."

"I don't have any problems." Leslie Kilgore suddenly felt that his job of marketing was more than half easier. Is this the opportunity brought by the support of a big platform behind it? Compared with Netflix's development, it is much stronger. She instantly doubled her confidence: "I will fully cooperate with the head office."

Mark Randolph went on to say: "In our next phase, the most important issue that needs to be solved is to reduce costs! Once we fully promote the Sky Screen plan, if it is the current cost, we will only incur more serious losses."

Tom Dillon, who took over as chief operating officer, said: "Our main model is still at the stage where we charge a rental fee of $4 and a delivery fee of $2 per disc. But with the addition of authorized lease sharing, labor, transportation, and mailing costs, The cost of each order is as high as $6.5."

The meeting room was very quiet and everyone knew what it meant.

Mark Randolph said: "Our goal is to reduce the cost of a single order to $2, so as to ensure the success of the Sky Screen plan."

Tom Cook said: "Among the costs, delivery costs do not account for a high proportion. At this stage, it is impossible for us to keep the single-piece shipping cost lower than $2."

Leslie Kilgore said: "The higher cost is the DVD purchase cost and related licensing fees. The average purchase cost of Netflix's DVD is $15 per DVD, which is the lowest price the publisher gives us. "

Ronan said directly: "The cost of new DVDs can be reduced to about $10, and the old ones will be lower."

Embassy Pictures has the ability to distribute DVDs. The cost of converting and printing DVDs on site can cost less than $3 per copy on average, and with the advancement of technology, the price has shown a significant downward trend.

"During this time, we have had separate contacts with the six major Hollywood companies." Leslie Kilgore glanced at his colleagues. After Netflix was acquired, they also wanted to make some achievements as soon as possible to show the new boss. It also proves the ability of the original management, but the most important aspect of DVD authorization is quite unsatisfactory.

She said: "They didn't change the DVD wholesale price of $15. They told us that it absolutely wouldn't work. They said they would give us DVDs and licenses, but don't expect any discounts."

This is no different from Hollywood's previous attitude towards Netflix. If Netflix can obtain the license at a high price, it will not be delayed until now.

Ronan asked, "The old and new films are the same?"

"Yes." Leslie Kilgore replied, "They are very arrogant, just like Blockbuster."

Ronan has had too many contacts with Blockbuster, and he naturally understands Blockbuster's situation. The arrogance caused by its long-term monopoly has caused customers to increasingly resent the chain giant's late fees, limited choices and poor customer service.

The six major Hollywood companies monopolize the North American film industry, especially the majority of the copyrights, and they compete and cooperate with each other. They have tacit and consistent interests in many aspects. It is too great to want them to make a profit to a small customer. Difficult.

But it is impossible to give up Hollywood film licensing. After all, this is North America. Even if you get more overseas licenses, it will not change the reality that the main audience of film and television works is Hollywood.

"Let’s hand over the authorization negotiations with Hollywood to the head office." Ronan was ready at the beginning of the acquisition of Netflix. If Netflix can handle it by itself, it won’t be the current situation. The company is a hard bone, and it is not easy for them to cut prices."

Everyone at Netflix knows this. After all, they have not experienced the arrogance of large companies in recent years.

Ronan thought of Robert Iger’s suggestion. If Relativity Entertainment has a huge film library, in fact, these are all solved easily. The interests of the industry are entangled. Each of the six major companies has peripheral channels. If there are enough film copyrights, they are mutually authorized. In this case, Relativity Entertainment can obtain the relevant authorization without much effort.

The problem is that in the film library of Relativity Entertainment, even the previous video tape movies of Shahai Entertainment and the films bought by Embassy Pictures from overseas in the past few years are counted together. There are only more than 20 movies.

The meeting ended. Because of Ronan's relationship with Relativity Entertainment, almost everyone was very optimistic about Netflix's future development.

Ronan knew that buying Netflix was just the beginning.

Excessive cost is one of the key issues that must be resolved as soon as possible.

In the office, Mark Randolph said to Ronan: "We still face many problems."

Ronan asked bluntly: "Mark, don't you think that once we solve all these problems, we will create a particularly high entry barrier for this industry that is unattainable? Potential competitors will not be able to enter in a short time. This industry, especially the chain giants like Blockbuster and Hollywood Video, which hold many licenses for film and television works."

Mark Randolph can imagine that if companies like Blockbuster and Hollywood Video decide to expand their Internet business two years in the morning, Netflix will not be competitive at all.

"Yes!" Mark Randolph was as confident in Netflix as always: "In this industry no one can catch up with us!"

He looked at Ronan: "Do you have a plan for authorization?"

"Frankly speaking, even if Relativity Entertainment is a member of the industry, it is difficult to talk to the Big Six." Ronan did not shy away from this point: "The single cost is not high, but we cannot have the opportunity to choose randomly. Large companies have huge film libraries, so they will inevitably use package authorization."

Good movies and bad movies are licensed together. This is Hollywood's usual method, and Ronan does not do less.

Starting from himself, Ronan said, "One more thing, we talked directly to the Big Six. In addition to these, we have to buy DVDs from them. The cost is even greater."

No matter how many DVDs you buy, as long as you use them for your own use, there is no problem, but for commercial operations, you will need related expenses.

Despite all the difficulties, Ronan was very calm: "The theory of relativity has already started to work."