Earlier quoted context omitted.
always wondered if netflix couldn't have had warehouses full of dvd drives to avoid licensing fees. wouldn't work for new releases with a lot of peak demand but maybe it would be more feasible for the back catalog of older titles.
When you buy a consumer DVD, that DVD only has a license for home viewing. Video stores require a special license to rent out videos. So, I assume netflix would have to pay that fee at least (which they probably already had for their mail order DVDs).
First sale doctrine covers rentals, but having good relations with studios to get supply of new releases often influences rental establishments to avoid buying discs at retail to rent out. (But, RedBox will sometimes do it)