Those of you that have not seen the Red Envelope logo at the beginning sequence of a DVD, this Netflix wing buys the rights to distribution the same way that major movie studios do. They made quite a splash by buying up movies that major studios thought were too quirky or strange to attract a large scale audience.

Red Envelope had a strategic advantage in releasing these films though. Because movie theatres have only a limited number of show times per day and a limited number of seats per theatre they have to show films with the lowest common denominator of appeal. Red Envelope has streaming on demand and a nearly unlimited number of seats at any given show time, which is WHENEVER someone clicks. They were involved in strange projects like one of my favourite movies of all time, Helvetica. A movie about fonts is not going to be the next blockbuster, but it definitely came out bigger than expected thanks to Netflix and REE. They also took part in No End In Sight which was nominated for Best Documentary in 2008. Some of these films were top notch.

Some have suggested that it was strong arming by a major studio, others suggest that there was a reason the major studios pass over the films, they just were not that good, or too small of an audience.

They were right to try, but Netflix also rents those movies from those big studios. One buy of a movie that perhaps a studio had its eye on would technically be supplier competition. And if you’ve ever seen a situation in business like it, it’s nasty.

“You can be my supplier, but you will NOT be my competition.”

This old mantra is forgotten way too often. It may be that some of the movies were not good, but most movies are not good. It seems that it is a question of supplier competition. Netflix supplied major movie studios with a distribution channel, and then competed, sometimes unfairly by streaming movies from their distribution service instead of major studios.

Sometimes it is a good idea to keep your core business as your focus.