Ben Fritz, a writer for the LA Times, reported the other day that the major studios are considering spreading out the time between when consumers can buy DVDs and when they can rent them. As it is right now (and has been for years), movies are available to rent the same day that they can also be purchased. According to Reed Hastings, chief executive of Netflix, he has recently met with several of Netflix’s biggest suppliers (read: studios and distributors) to discuss a “delayed-rental proposal.”
The current DVD release system has DVDs available for purchase and rental on the same day from companies such as NetFlix, Blockbuster and RedBox. Under the new DVD release system, those dates would be separated by a few weeks. What is the reasoning behind this move? Studios cite a sharp decline in DVD sales. Said Hastings:
“The studios are wrestling with declines in DVD sales while the DVD rental market has been modestly growing. One of the mitigating steps some are considering is introducing a DVD retail sales-only window for a few weeks.”
The faltering economy has families and individuals looking for ways to save money, not spend it. One of those ways is to rent DVDs and not purchase them; a theory that is backed up by NetFlix’s recent quarter numbers of 24% growth! That is a truly impressive financial achievement in this harsh recession; an achievement that surely has investors smiling, but not as impressive as rental company RedBox’s growth. RedBox saw a staggering 113% growth in the first six months of this year!
Those sorts of numbers where the reason that studios 20th Century Fox, Universal Pictures and Warner Bros. all attempted to keep RedBox from having access to their DVDs until well after the initial release. The popular rental giant only charges $1 per night, per rental, and the studios felt RedBox wasn’t charging enough for people to rent their movies. Of course, RedBox responded with a lawsuit to keep that from the studios off its back and the suit is still in court…although the point may soon become moot.
The new release system could go into effect as soon as next year and if that happens, every rental company will be affected, not just RedBox, and I would suspect the suit would be dropped by all parties involved. Said a RedBox corporate spokeperson:
“We must have a level playing field and the right to buy movies at the same time as any of our competitors.”
Ben Fritz makes the following statement in his report:
“Hollywood studios prefer that consumers buy DVDs because that generates significantly higher profits than rentals.”
And Wade Holden, an analyst for SNL Kagan, gives this insight:
“The studios might try to implement something like this to increase demand for sales because they need to protect that revenue stream the best they can.”
Does that statement strike anyone else as extremely greedy? I understand movie studios are a business aiming to make money for both themselves and investors; I’m not arguing that point at all. What seems ridiculous to me is their business model and the idea that pushing back rental dates will make consumers buy a movie because they don’t want to wait another three or four weeks to rent it.