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Santa Fe, NM

"Baldrick, I Have a Cunning Plan!"

The studios have been gunning for Netflix ever since Starz cut a deal to sublicense their catalog to Netflix. That agreement expires in a few months and the studios have been telegraphing they will be demanding huge increases in license fees, if they license at all.

By splitting DVDs and streaming, and taking the heat for the rate hike now - before negotiations start, Netflix can point to the drop in subscriptions and tell the studios they have no basis for huge license fees.

Once the deals are signed, there's nothing that says Netflix can't start offering package deals again, if there really is demand for them. According to the CEO, streaming is far more popular and physical discs.