From The Annals Of Bizarre Logic

Via Patrick Klepek, a truly odd rationalization on the part of Microsoft’s Netflix partnership.  The question is why it requires a Live Gold membership to access the Netflix titles.  The answer is a non-sequitur:

“I think it’s about adding value to the gold membership,” said Xbox director of marketing Albert Penello. “I mean, obviously, the partnership there — it’s a lot of bandwidth. Obviously, there’s the cost of the licensing on the Netflix side, so…you’re not really paying for the movie. On silver, you have to pay for the TV show or movie that you download. Here, you don’t…”

Let’s unpack this.  There are three points here.  The first is something about “adding value” to the gold membership.  This may be true, but it’s about adding value for Microsoft, not the player.  After all, MS is the one who decided whether to require the Gold subscription - which means that this is really not about adding value to Gold but rather limiting the value from Silver memberships, such that players feel compelled to upgrade.

The second point seems to imply that the Gold membership is required to offset the technical costs of offering the Netflix service.  (Mr. Penello doesn’t seem to notice that this directly contradicts the previous point - that Gold was required to reflect the additional value that is delivered by Netflix.)  But this doesn’t make a ton of sense, unless Microsoft negotiated a truly terrible agreement - are they not getting any money from rentals or new subscribers?

Finally, the notion that customers aren’t paying for their movies is pretty absurd on its face.  A Netflix subscription is required to access the service.  MS may not be charging incrementally, but they are just passing through the service’s costs - plus a decent profit of which they’re surely getting some cut.  The fact that Netflix doesn’t even need to bear the costs of shipping out the DVDs and administering them means that even more of that price is profit. 

The bottom line is that Microsoft is using the Netflix subscription as a carrot to force people to upgrade their own memberships.  There’s nothing wrong with it, but it’s insulting to our collective intelligence to pretend that it’s for our own good.