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Virtual DVDs, Revisited
This isn't a silly wish-fulfillment question like "Why doesn't Papa John's give pizzas away for free?" or "Why doesn't Gmail come with more free storage space?" This is about why Netflix and the studios won't take our money for something they could legally provide -- the exact same service that they provide for regular DVDs, but in streaming virtual-DVD form. In other words, consider Bob who wants to pay Netflix $15 a month for their standard DVD-rental service, watching up to 10-20 movies per month for the flat monthly fee -- but he only wants to watch them on a phone or tablet. A profit-seeking company, with the rights to provide the movies in any format, would offer Bob that deal. But they don't offer that option, so Netflix and the studios get nothing, and Bob probably figures out how to pirate movies for free instead. Why would a profit-maximizing company turn down the opportunity to take Bob's money? If the free market never obstructs deals which are a win-win for everybody, why doesn't that happen here?
Some quick responses: A few users said that they wouldn't want to switch from DVDs to "virtual DVDs" even if they could, since they prefer regular DVDs because they have limited bandwidth or Internet access, or their main TV was hooked up to a DVD player but not an Internet streaming device, etc. So to clarify, what I was asking is why Netflix doesn't offer the option of checking out virtual DVDs instead of real ones. So of course anyone who preferred regular DVDs could still get those, but you would have the option of having streaming "virtual DVDs" instead of (or at the same time as) the regular DVDs mailed to your house.
A couple of people argued that the real difference is because of the first sale doctrine -- once Netflix has bought a copy of the DVD, it can do whatever it wants with the DVD, including renting it to customers an unlimited number of times, without re-negotiating the rights with the studio. On the other hand, if Netflix wants to stream a movie to its users, it has to obtain the studio's permission, which could come with any number of restrictions (Netflix streaming is geographically limited to U.S. users) and could be revoked at any time. Hence, no virtual DVDs.
Unfortunately, that explanation doesn't work because Netflix generally acquires DVDs from studios as part of a cooperative agreement, not because once Netflix has the DVDs "they can do anything they want and the studios can't stop them". And any time Netflix acquires a DVD from the studio as part of a cooperative agreement, it really doesn't matter what the pricing agreement is between them, you are still left with the non-trivial question: Why don't they just add in the potential customers of "virtual DVDs", and then they would have more money to divide up all around?
Suppose the studio sells the DVD to Netflix for a flat fee of $50. Netflix pays this much because they expect enough users to check out that DVD, that the DVD will be responsible for bringing in an average of $60 worth of users' membership fees. Now, Netflix knows that if they bought the rights to a "virtual DVD" -- which could only be "checked out" to one user at a time -- they would be able to make $66 over the lifetime of a that virtual DVD, since they'd be able to make slightly more by including the users who didn't want to deal with regular DVDs. So they offer the studio $55 to acquire a single "virtual DVD", which can only be "checked out" to one user at a time, but which they have the rights to "check out" to people forever. The studio makes $55 instead of $50, Netflix makes a net profit of $11 instead of $10, and a few additional users get to check out a movie that they otherwise wouldn't have. Everybody should be happy with this change -- which makes it an interesting question as to why it doesn't happen.
Or, suppose that the studio negotiates a different royalty-based deal with Netflix: the studio gives Netflix the DVD, and Netflix pays them 50 cents each time the DVD is mailed to a user and returned. Netflix likes that deal because if the user is paying $15/month to rent an average of 20 movies per month, that's still 75 cents for Netflix for each DVD mailing, leaving them with 25 cents left over after paying the studio's royalty. But Netflix figures that if they offered a virtual DVD plan -- 20 "virtual DVD" rentals per month, for the same $15 -- they could rope in a few new paying users that they didn't have before, taking $15 per month from each user, paying $10 to the studios (50 cents royalty each time a "virtual DVD" is "checked out"), and having $5 left over. Plus of course the studios get $10 from each user that they weren't getting before. Again, win-win for everyone, so a bit of a mystery why they don't do it.
The moral of these two examples is that as long as the DVDs are provided as a cooperative agreement between Netflix and the studios, there is no simple explanation for why they don't offer virtual DVDs as an option. It doesn't matter whether the DVDs are bought by Netflix for a one-time fee, or rented by the month, or paid for in royalties based on the number of times that they are rented out, or paid for in royalties based on the number of days each user keeps them before mailing it back -- in all cases, virtual DVDs would bring in some additional money, which could be divided between Netflix and the studios so that they both come out ahead.
In rare cases the DVDs are actually not acquired as part of a cooperative agreement -- in 2012, Disney refused to provide copies of John Carter to Netflix, so Netflix simply went out and bought copies at retail and mailed those copies to their subscribers. In that case, of course, it's trivially true that Netflix could not provide "virtual DVDs" of John Carter to their users, because it would have been illegal without Disney's permission. But in the vast majority of cases where Netflix is providing DVDs to users with the studio's knowledge and cooperation, that's where it's puzzling that virtual DVDs are not an option.
In the last article I ended up concluding that the reason was price discrimination -- whereby a company provides two different tiers of service, at about the same cost to themselves, but where the cheaper version of the service comes with some inconvenience that is deliberately put in place to steer less thrifty shoppers to the more expensive version. In other words, maybe DVDs are inconvenient on purpose, to steer users towards spending $2-$5 to download a digital copy of each movie they want to watch, instead of watching 20 movies per month for $15. You can get cheap movies, but you have to be willing to deal with clunky DVDs. (The irony, of course, being that DVDs originally became popular because they were so much more convenient than their VHS tape predecessors.)
I'm not sure if my non-obvious answer is right. However I think the "obvious answers" are wrong.
Well, I'll manage. In 2013 I wrote about low-tech tablet hacks including #2, using C-clamps to mount a shelf to another bookshelf, and then attach a tablet holder to hold a tablet above my head while watching movies in bed, which is still to this day the most comfortable way I've ever found to watch a movie. It turns out it works for a portable DVD player as well, but for all the people who moaned at the last pictures going "When did Slashdot turn into Pinterest?", I didn't bother taking a picture this time. Just picture something that's such a hacky solution it looks almost steampunk, but these days, so does a portable DVD player.
Who are you, why should we care, where would we go if we WANTED to read this personal musing (not here, I'm guessing). Seriously.
I don't want to rain on your parade, but honestly Slashdot is not a "weblog". This kind of post is much better suited to your blog, but I'm guessing it doesn't get any hits when you post it there. Your amateur rendition of why the world should be your way is of no interest to me. It's not even tech-related, to be honest.
It's junk like this that TURNS PEOPLE OFF this website.
Getting the answers for the questions no one cared about, and presenting them in a fashion no one will read.
Giving his thoughts to the slashdot crowd is like giving a mule a spinning wheel. They don't care, and probably wouldn't know what to do with them even if they did.
Do you not remember CDNow, and the virtual CD service? You probably don't since it was annihilated in a legal storm of massive furor.
Why is Netflix being unable to offer "virtual CD"s any more complicated than "movie studio lawyers do not like it"??
"There is more worth loving than we have strength to love." - Brian Jay Stanley
In your mind what's the difference between a stream and a "virtual DVD"?
I can't seem to imagine a difference that's relevant...
If you think, for even one second, that the MPAA will allow you to conveniently watch their movies however you please, the instant they are released, worldwide, you should check yourself into a mental hospital.
"Netflix likes that deal because if the user is paying $15/month to rent an average of 20 movies per month,"
What Netflix won't like is people who rent 40 movies a month because subscribers won't have to wait for the snailmail.
"When did Slashdot turn into Pinterest?"
Or someone's blog...
How is this different from the streaming service that Netflix currently offers?
I'm sure the author has some differences in mind, but it wasn't clearly spelled out.
last i read itunes sells/rents over 300,000 movies and tv shows a day
add amazon, vudu, cinemanow and who ever else and there is no way netflix will be able to license rentals for $8 a month.
you also have to figure that like DVD's they will have to limit the number of times a movie can be streamed at the same time so even with a virtual service you may have to wait weeks or months to watch it when you want.
How is this different than the streaming service?
..over something so pointless. Redbox offers "virtual DVD's". You could always switch to their service or use both Netflix and Redbox. Redbox charges by the rental, not a flat fee, so you wouldn't really be paying 2 membership fees. I guess in your little world, that would be considered a "hack".
Totally wrong. It is all about the first sale doctrine. Without it, dvd rental wouldn't exist or would be significantly more expensive. Studios are not cooperating with Netflix, they know they can not stop them and only strike a deal to make the best of a raw deal for them. Typically this involves a slight discount for a delay in release. Studio would never let first run movies be rented virtually for any less than the $3-$4 they get from other VOD services. If they let netflix do this, studio would lose money by other sources of income disappearing (VOD services). Netflix DVD rental only works because the low turnover (2-3 days in the mail) makes the $.50 mailing cost below what you can consume in a month. With virtual dvd, you could easily consume 3-5 a day and if netflix had to pay $.50 a stream to the studio, it would lose money. The streaming service only works because they are significantly after the DVD release and can negotiate much smaller per stream payments. If you get old movies for $.05 a stream, netflix is profitable.
I think this will put it pretty plainly why.
http://news.slashdot.org/story/11/08/02/1852232/zediva-shut-down-by-federal-judge-mpaa-parties
If they sued someone over a remote DVD playback, then they would also license it differently and probably not under more favorable terms than "traditional" streaming.
I don't know everything.
One thing to keep in mind is that rights are complicated, and often there is a lot more involved then a studio waking up one day and deciding to allow a particular bit of media to be streamed. Often the way contracts are written, well, they left out this scenario, esp for older stuff, and various piece of content that go into a work may or may not be covered. A classic example is the inclusion of music, when music is put into a piece the people who produced the movie do not 100% own that music, they have the right to use it in their work and certain types of distribution. If you want a streaming version of the film you have to go back and rewrite the contract to get that permission. It can be a complicated, expensive, and time consuming process.
On the other hand, once a DVD is pressed, what can be done with it is pretty well established, so as long as the disks exist Netflix can rent them.
In his incredibly naive mind he imagines a stream that is limited to one person at a time and backed by a physical DVD.
Or at least I'm pretty sure that's what he meant, reading his whole missive would lower the IQ of anyone by ten points.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
My god, that's full of ignorance.
Will this actually be a true substitute for physical media, including alternate soundtracks (including 7.1/7.2 or 9.1/9.2 or even 11.1/11.2 surround when the media delivers it), deleted scenes, alternate angles (rare but some films do offer them as an extra feature), commentaries, easter eggs, and so forth? If not, I'll keep buying physical media.
The Christian Right is Neither (Christian nor right). See: Matthew 23, Matthew 25, Ezekiel 16:48-50
Your "non-obvious" answer flows directly from the obvious answer that you say is wrong (and is the real answer) -- the first sale doctrine. The only reason Netflix has cooperative agreements with the studios is because they have the "threat" of simply going out and buying the DVDs. Without that, the studios would not deal with them, preferring to sell directly to customers. The cooperative agreements only come into play when the studios think they can gain a little bit by economies of scale vs forcing Netflix to go buy the discs (as happened in the Disney case you note). By doing everything they can to make Netflix as annoying for customers as possible, they try to force those customers to pay them directly rather than going through Netflix (which would make them more money -- attempted market segmentation), but as you note, it mostly just forces people to pirate instead.
It all comes down to insane copyright. We could do amazing things with culture if copyright was outlawed.
Good-bye
I'm so confused right now. Isn't this exactly what Netflix is doing? I have Netflix on my phone, on my game console, on my computer, on my laptop, and I can watch whatever I want for a flat monthly fee. Did this question drop out of a 10 year old discussion board or something?
Yes, price discrimination is probably part of it. Amazon is probably also involved, since Netflix runs on AWS, and a "virtual DVD" would compete directly with Amazon Instant Video.
"as long as the DVDs are provided as a cooperative agreement between Netflix and the studios, there is no simple explanation for why they don't offer virtual DVDs as an option."
Sure there are:
1. The virtual DVDs would compete with pay-per-use rentals (i.e. iTunes, Google Play, Amazon Instant, etc.).
2. The studios have in many cases already sold those rights - for example, HBO owns the rights for subscription-based streaming of all Universal movies from about 12 months after theatrical release until 24 months after release. Their rights don't extend to physical DVD, nor do they block online pay-per-viewing rental, but they DO block subscription-based services.
There are others, but to claim that this is something that isn't happening because those silly studios and those morons at Neflix haven't figured out that it's a good idea is moronic.
THis whole discussion is completely muddied by calling it Virtual DVDs.
It isn't virtual DVDs at all. I can't mount one remotely as a disk, or get an iso, and also probably not see the other stuff that would normally come on a DVD such as features and trailers.
You need to call it what it really is, conventional streaming on a views-per-month plan, which is pretty much identical to what you already get for your $8.99/month from Netflix other than what you get already isn't limited.
By adding a view limit you would probably save at most a buck month. If that amount of money is significant to you then you probably shouldn't have a Neflix account at all.
I'll stick to getting the physical DVDs by mail thanks. IMHO streaming sucks, no matter how you pay for it. DVDs dont assume a hidden requirement to have a stable internet connection, nor do they use bandwidth as you watch. They have far better image quailty than some masively compressed-for-internet video could ever provide, and you also ususally get all sorts of extras on DVDs such Directors voiceovers, bloopers and previews.
Ugh.
This sounds like Aereo, which also provides a business model in which physical resources dictate the scarcity. Since they are currently preparing for a trial at the Supreme Court it's probably wise to hold off a bit.
the studios are leaving cash on the table
You must be new here; the studios have always been in the business of fighting progress as long as possible in order to protect existing revenue streams.
I thought the big reason that people sign up for Netflix DVDs by mail instead of cycling to a Redbox was to watch movies first published before streaming became practical. Redbox, as I understand it, is all new releases all the time.
First, NetFlix started their business by buying DVDs off-the-shelf and renting them out. If they are using cooperative agreements to obtain DVDs now, then that's a change since then - it may very well save them money, but nonetheless it's a distraction here. The people that want DVDs are going to get the DVD service.
Second, VirtualDVDs are essentially NetFlix's Streaming business, and it makes sense they'd do the streaming instead of a DVD download as you describe if for no other reason than the technical challenge of keeping people from sharing the download or breaking the download so that they can keep a copy. For example, you could use a ZFS partition to snapshot the download right before returning it so that the upper level software couldn't tell that it was copied; and then crack away at the copy until you have your HD digital download version of the movie. In other words, doing a DVD-download-as-a-service model simply has too much risk for NetFlix or anyone else in their business (e.g. Hulu, Amazon, Google, etc.).
Third, my family & I watch NetFlix on our iPad, iPod, Android Phone (NexusOne), Android Tablets (ASUS Transformer Infinity, Nubi Jr.), and computers (HP Laptop running Windows Vista, Linux Desktop with Pipelight). We have a good size DVD collection that we watch on the computers too, but NetFlix as it is now just transfers and I don't have to think about space considerations - which I would with a DVD-download-as-a-service solution.
So DVD-by-mail and Streaming are the two versions of the service that make the most sense and both offer the least risk compared to other potential solutions.
Truth is like the sun. You can shut it out for a time, but it ain't goin' away. - Elvis Presley (source: imdb.com)
Isn't this exactly what Netflix is doing?
The difference is that the major studios have chosen to make far more films available through DVDs than through streaming.
I can watch whatever I want for a flat monthly fee.
Only if the studio has chosen to make it available to Netflix for streaming.
you also ususally get all sorts of extras on DVDs such Directors voiceovers, bloopers and previews.
Not always. Some studios have a habit of stripping out special features from rental copies. Some even strip out subtitles from rental copies, a practice that I find discriminatory against the deaf and hard of hearing.
Because the studios don't want another online sales channel to undercut their physical DVD sales (because their profit is higher on the latter). Because Netflix wouldn't make enough money from this service to offset the legal hassle that would come if they didn't play by the studios rules. Netflix is already being slightly bent over by its peers for network access - it doesn't need another hassle. Finally, if you press on some marginal activity like this, the studios might stop working with you altogether.
Is this enough, or need I go on?
That is all.
Just because they actually have deals to buy the DVDs directly from the studios doesn't negate the fact that it is the first sale doctrine that allows them to do this in the first place. As you even noted, when Disney tried to not allow this Netflix just went around them and bought them at retails to have the movie to rent. Therefore the studios CAN'T stop it because of the first sale doctrine. They have to accept that fact so they worked out deals directly with Netflix that makes it easier for Netflix to get the DVDs it wants and presumably is better for both parties as it is probably cheaper/more convenient for Netflix and the studios are making more money and/or getting Netflix to agree to conditions they don't necessarily have to.
They stop the renting of "Virtual DVDs" simply because they can. There is no first sale doctrine that says Netflix can do this either way so they have no leverage to force the studios to allow it so the studios don't. Because they can control it they try to find more ways to "Monetize" it to make more money off of steaming or digital sales etc but it all comes down to the first sale doctrine not applying and giving them the ability to control it.
Bandwidth is too cheap for virtual DVDs. You can get connected almost anywhere and stream. And if you are really in need of content that badly you'll buy it from the "store" of your choice and download it. They make more money this way. Its toooooooooooo easy these days to break encryption, so once its busted its busted for life and the content owners don't want to have to keep reinvesting in newer tech/encryption schemes, so they won't offer it. Example... DVD / BR... Even CDs are almost a thing of the past since they are clear digital music and the content owners don't want it shared out in the open.
Streaming content is more akin to broadcasting than it is to the physical delivery of DVDs. The FBI disclaimer at the beginning of movies penalizes broadcasting movies under the penalty of the law. The purchasing of a physical DVD does not allot Netflix the legal means to broadcast a DVD. Plain and simple. Netflix already provides streaming services legally via other arrangements. Therefore, I'm not sure what the point of this posting is.
Umm, the DVDs aren't a fixed number in a month for most subscribers, except the limit of actual mail times. (BTW, I'm NOT one of those who actually watched and returned a DVD in a day..)
(I was a Netflix member in the very very early days, where it WAS 4 DVDs/month.. and it was still cheaper than rental stores.)
The streaming library is currently different from the physical DVD library. Not everything is in both.
Maybe I misunderstand, but I've had netflix for years, and that's how my wife and son use it the most - by streaming movies. AFAIK, there is no limit on how many you can stream.
The problem is that the physical DVD netflix service has a selection that is different from the streaming netflix service. If you want the increased selection, you have to forego the ability to download it.
There is no technical barrier preventing netflix from allowing you to download a DRM'd exact copy of a DVD. You could then play it, or transfer it to another device, or maybe even transcode it for smaller screens and transfer it to another device, all within their app. The only barrier is copyright. And by allowing in-advance downloads you could preload devices for use where there is no data connection.
The OP is suggesting that this copyright barrier doesn't make sense.
Please stop with these Bennet Haselton posts, please.
-A long time lurker
this shit blows.
Movie studios won't license 20 streams a month for $10-15, because they can and do make more money selling individual stream licenses for $5, or thereabouts.
End of discussion.
Why don't the studios let Netflix stream the movies that are currently only available as physical DVDs
Because the studios are asking more money than Netflix can pay at a flat rate for streaming. Simpler answer: The studios hate money, or rather they value imaginary money more than real money so they maximize the imaginary return.
Why are you trying to ask a rational question of an entity that has shown no degree of rationality? You come across as the very worst sort of engineer, explaining how something can technically work when we all know it can technically work and the thing holding everything back is not technology at all.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
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. ...
That would bring in more money, and that's what makes it an interesting question as to why they don't do it.
You have to remember that we are talking about the same industry that didn't want to have a "home video" market in the first place. The fear was that if people could get movies at home, they would stop going to the theaters and the industry would go bust. (I am oversimplifying) In the end, they were wrong and have made even more money then before.
They have repeated this behavior several times since: Video rentals. Cable broadcasting. Video streaming (of any kind).
Well, this is really still the left overs of the last one. Leagally the studios CAN hold back streaming rights, even though they might make more money, so they DO hold back streaming rights. Netflix may be asking (I don't know) for streaming rights, and the studios are likely saying, "for THAT movie it will cost you an additional $100K / year up-front." At which point Netflix says "Never mind, we'll just stick with streaming these other ones that were cheaper." It doesn't matter that they might have made $200K (less the $100K investment = $100K profit), they would have to be willing to risk paying ahead. I don't know what value of risk Netflix is willing to incur, but there is always a limit, and likely the studios are looking for Netflix's limit in an attempt to minimize the studio's risk (or to maximize the studio's risk-free profit.) The studios might have even made $150K, leaving Netflix $50K, if they didn't ask for stupid contract terms, but we will never know since it wasn't tried in this hypothetical scenario.
I see stupid business decisions made over contractual issues all the time. Many where it would be in everybody's best interest to just give a little for free, in order to make the deal work, but instead nobody gets anything. (Actually everybody loses, because time/money was spent in unsuccessful negotiations.)
I don't know what model the studio contracts with Netflix are following, but I sense that you don't know for sure either. I just know that past behavior often suggests future decisions, and we have seen this before.
McFly777
- - -
"What do people mean when they say the computer went down on them?" -Marilyn Pittman
This would finally destroy dvd/blu rays sales and the cable channels would just be watched dor their shows
This is purely a question of legal licensing. Studios are happy to participate in rental DVDs, but not nearly so much in online streaming.
You are asking for what Netflix already provides - online movie streaming. Why don't studios allow Netflix to license more movies for streaming? No good reason, really. Eventually they will get over their deep fear of online streaming. Eventually.
Netflix cannot just stream the DVDs they already have because the license they own them under prohibits it - the cooperative agreements you emphasize so strongly. Why? Same answer.
I can't remember the last time I used a CD or DVD...mp3's or iso's with a virtual dvd player.
Zediva tried something like this - they actually put physical dvds in a player and rented you output of the player exclusively. The studios got a judge to shut them down. As you say, it's price discrimination - studios want more money for streaming rights because they can, and they've gotten the law on their side.
What the hell is this "DVD" you keep blabbering on about?
all of your logical and economic reasons are no match for the power of fear, uncertainty, and doubt.
I would ask for a Bennett section so that we could ignore the posts but neither Timothy nor Soulskill can get things posted into the right sections anyway, so never mind.
'The tyrant will always find pretext for his tyranny.' - Aesop's Fables
One possible reason why this is not offered is because it is a service that already IS offered by various cable TV providers.
I suspect that the studios probably don't want Netflix and other similar providers to cut into those profits, nor deal with any possible backlash from the all-to-powerful cable giants.
Differences between how you act when some one is watching, and how you act when no one is watching, define who you are
If studios wanted netflix to stream the movies, they can do so without some sort of bizarre virtual DVD agreement. You understand that, right?
Netflix, if offered such an arrangement, should turn it down anyhow. It's openly hostile to the users. Maybe you remember some download sites (or custom file sharing applications) where you got stuck in a queue and had to wait around to actually download anything. Unless, of course you paid extra to jump ahead of everybody. So what happens when Netflix has 10 copies of "Bennett's Butt Bandits" but 20 people want to watch? People hate Netflix, that's what happens. If you're queuing up DVDs by mail, waiting is acceptable. For instant, on demand video, it's not.
Maybe you should ponder why netflix doesn't just buy lots of tickets and live-stream movies from the theater on day 1.
Reading this make me realize something about my Netflix (and other streaming services) viewing expectations that I don't think I'm very proud of but are true. When I First got Netflix it was DVDs only, and there was a natural understanding that there are limited numbers of DVDs available and I have to wait my turn. As online streaming became available there came with it the understanding (as was frequently advertized) that I can watch those titles anywhere, anytime I want. I don't think I would be very receptive to the idea that I have to get back in line and wait for my turn to stream one of a limited number of available streams. I've grown accustomed to the instant gratification of streaming video.
I wrote one of the first CD/DVD emulators back in '98 when my wife was pregnant with our first son. At first, it was just a project that I could use to teach myself some Windows Kernel programming, but eventually I productized it and got a lot of copies out there. Eventually, after adding a bunch of cool features, it became just a game of trying to beat the latest CD copy scheme that the game companies would release, and it grew tiresome. One thing I was pretty proud of was the audio engine. CDs have a data mode and an audio mode (the audio mode has more data at the cost of some error checking and correction, and a completely different low level format. Microsoft made development really difficult by really changing up the storage stack on every release of windows... I'm not sure what things are like now, but I dunno if anyone is even keeping up with the virtual DVD market now a day?
Awesome.
Even if Netflix gets DVDs through some kind of cooperative arrangement, the first sale doctrine sets a ceiling on what the studios can ask for. If the studio doesn't offer a good enough deal, Netflix can go out and buy discs through normal channels and rent those. There is no similar ceiling on what the studios can request for streaming rights. That's one reason why the studios want to move away from physical discs, and possibly the reason we haven't yet seen Blu-Ray 4K; they don't want to be saddled with the first sale doctrine and its constraints.
The question is whether Netflix could buy discs through normal channels and then stream them (limited by the number of physical discs they own, one stream per disc) without the need for any special agreements. I don't think there have been any definitive court decisions on that question. The catch is that they might have to use the physical discs and dedicate one DVD drive to each, because rips of DVDs cannot currently be legally made in the US; that would make the service prohibitively expensive to offer.