Renters might have to wait for new releases
10-23-09 | 07:20 PM
#1
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Renters might have to wait for new releases
http://www.latimes.com/business/la-f...tory?track=rss
For those who like renting movies, Hollywood may soon have a message: Prepare to wait.
In an effort to push consumers toward buying more movies, some major film studios are considering a new policy that would block DVDs from being offered for rental until several weeks after going on sale.
Under the plan, new DVD releases would be available on a purchase-only basis for a few weeks, after which time companies such as Blockbuster Inc. and Netflix Inc. would be allowed to rent the DVDs to their customers. The move comes as the studios are grappling with sharply declining DVD revenue, which has long propped up the movie business.
Reed Hastings, chief executive of DVD-by-mail company Netflix, revealed that he had discussed delayed-rental proposals with several of his biggest suppliers. People close to the situation at several studios confirmed that such plans were under consideration and probably would take effect next year.
"The studios are wrestling with declines in DVD sales while the DVD rental market has been modestly growing," Hastings said on a conference call Thursday with analysts after Netflix reported impressive 24% revenue growth last quarter. "One of the mitigating steps some are considering is introducing a DVD retail sales-only window for a few weeks."
DVD sales have been hurt by the recession, which has caused tapped-out consumers to opt for cheaper rentals. But Hollywood studios prefer that consumers buy DVDs because that generates significantly higher profits than rentals.
20th Century Fox, Universal Pictures and Warner Bros. have all tried to impose a no-rental period of about a month on Redbox, the operator of kiosks that rent movies for $1 per night. Those studios believe Redbox's steeply discounted price undercuts DVD sales.
Redbox has responded by suing the studios, seeking to force them to sell it DVDs simultaneously with competitors. Meanwhile, the company is stocking its kiosks with DVDs it can't otherwise obtain by buying them from retailers.
Hollywood's concern about Redbox is heightened by the company's rapid growth. In the first six months of the year, Redbox's revenue soared 113%. Industrywide DVD sales, however, were down 13.5% in the same period, according to the Digital Entertainment Group, in part because consumers are embracing low-cost rental offerings.
There is also growing concern among studios with Netflix, which reported Thursday that subscribers increased 28% from last year to 11.1 million as of Sept. 30. Netflix and Redbox account for virtually all of this year's growth of about 9% in DVD rental revenue.
Studios considering the plan are betting that a sales-only window would push some consumers who currently rent DVDs into buying them, thus boosting profits.
"The studios might try to implement something like this to increase demand for sales," said Wade Holden, an analyst at SNL Kagan, "because they need to protect that revenue stream the best they can."
Such a move would undoubtedly decrease revenue for DVD rental companies. That might not only crimp the growth of Netflix and Redbox, but also further depress struggling rental chain Blockbuster, whose revenue fell 20% in the first half of the year.
Depending on the details, however, a sales-only window might not hurt the bottom line of major rental companies. To get them on board, studios probably would have to offer them a lower wholesale price than that paid by retailers, currently $18 for most standard DVDs and $25 for high-definition Blu-ray discs.
"If we can agree on low-enough pricing," observed Hastings, "delayed rental could potentially increase profits for everyone."
A universal delay for all rental companies might also end the ongoing dispute of three studios with Redbox. A company spokesman implied that Redbox would go along with a sales-only window if it wasn't singled out: "We must have a level playing field and the right to buy movies at the same time as any of our competitors," he said.
Whether consumers go along with it, however, may be another matter entirely.
In an effort to push consumers toward buying more movies, some major film studios are considering a new policy that would block DVDs from being offered for rental until several weeks after going on sale.
Under the plan, new DVD releases would be available on a purchase-only basis for a few weeks, after which time companies such as Blockbuster Inc. and Netflix Inc. would be allowed to rent the DVDs to their customers. The move comes as the studios are grappling with sharply declining DVD revenue, which has long propped up the movie business.
Reed Hastings, chief executive of DVD-by-mail company Netflix, revealed that he had discussed delayed-rental proposals with several of his biggest suppliers. People close to the situation at several studios confirmed that such plans were under consideration and probably would take effect next year.
"The studios are wrestling with declines in DVD sales while the DVD rental market has been modestly growing," Hastings said on a conference call Thursday with analysts after Netflix reported impressive 24% revenue growth last quarter. "One of the mitigating steps some are considering is introducing a DVD retail sales-only window for a few weeks."
DVD sales have been hurt by the recession, which has caused tapped-out consumers to opt for cheaper rentals. But Hollywood studios prefer that consumers buy DVDs because that generates significantly higher profits than rentals.
20th Century Fox, Universal Pictures and Warner Bros. have all tried to impose a no-rental period of about a month on Redbox, the operator of kiosks that rent movies for $1 per night. Those studios believe Redbox's steeply discounted price undercuts DVD sales.
Redbox has responded by suing the studios, seeking to force them to sell it DVDs simultaneously with competitors. Meanwhile, the company is stocking its kiosks with DVDs it can't otherwise obtain by buying them from retailers.
Hollywood's concern about Redbox is heightened by the company's rapid growth. In the first six months of the year, Redbox's revenue soared 113%. Industrywide DVD sales, however, were down 13.5% in the same period, according to the Digital Entertainment Group, in part because consumers are embracing low-cost rental offerings.
There is also growing concern among studios with Netflix, which reported Thursday that subscribers increased 28% from last year to 11.1 million as of Sept. 30. Netflix and Redbox account for virtually all of this year's growth of about 9% in DVD rental revenue.
Studios considering the plan are betting that a sales-only window would push some consumers who currently rent DVDs into buying them, thus boosting profits.
"The studios might try to implement something like this to increase demand for sales," said Wade Holden, an analyst at SNL Kagan, "because they need to protect that revenue stream the best they can."
Such a move would undoubtedly decrease revenue for DVD rental companies. That might not only crimp the growth of Netflix and Redbox, but also further depress struggling rental chain Blockbuster, whose revenue fell 20% in the first half of the year.
Depending on the details, however, a sales-only window might not hurt the bottom line of major rental companies. To get them on board, studios probably would have to offer them a lower wholesale price than that paid by retailers, currently $18 for most standard DVDs and $25 for high-definition Blu-ray discs.
"If we can agree on low-enough pricing," observed Hastings, "delayed rental could potentially increase profits for everyone."
A universal delay for all rental companies might also end the ongoing dispute of three studios with Redbox. A company spokesman implied that Redbox would go along with a sales-only window if it wasn't singled out: "We must have a level playing field and the right to buy movies at the same time as any of our competitors," he said.
Whether consumers go along with it, however, may be another matter entirely.
10-23-09 | 07:47 PM
#2
Re: Renters might have to wait for new releases
Redbox is gonna ruin the rental experience for everybody. The studios are probably doing this for all rental outlets to deal with redbox and other cheap kiosks.
10-23-09 | 08:07 PM
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Re: Renters might have to wait for new releases
ruin it!? i would say they save their customers money by offering
competitive prices. normally competition is always good for customers
in terms of pricing.
personally i am not effected, as i still purchase lots of new releases, but
i still find some studio moves too desperate.
this will only drive the public perception, that these studios represent the greedy corporate scum that has destroyed the economy, even more down.
on one hand i like spending money on movies, because i feel that my dollars
will contribute to producing good product in the future, but on the other
i feel that the reason why people are purchasing less and less, is not the
fault of redbox or the economy, but simply because most movies tend to suck lately and no effort is being put into new dvd releases!
most people have bought all the good scripted movies they love for their
collection by now and their are fewer new releases sparking interest.
there are just so many crappy movies people would get angry if they actually spent 20 hard earned dollars on them, but might give them a rental try for the fraction of the cost.
at the end of the day every dollar made is a dollar for the studio, but tell that to the shareholders!
i feel that since everything is just down to pure numbers in hollywood these days, thats also whats destroying them, because no one cares about good scripts or artistic value anymore.
competitive prices. normally competition is always good for customers
in terms of pricing.
personally i am not effected, as i still purchase lots of new releases, but
i still find some studio moves too desperate.
this will only drive the public perception, that these studios represent the greedy corporate scum that has destroyed the economy, even more down.
on one hand i like spending money on movies, because i feel that my dollars
will contribute to producing good product in the future, but on the other
i feel that the reason why people are purchasing less and less, is not the
fault of redbox or the economy, but simply because most movies tend to suck lately and no effort is being put into new dvd releases!
most people have bought all the good scripted movies they love for their
collection by now and their are fewer new releases sparking interest.
there are just so many crappy movies people would get angry if they actually spent 20 hard earned dollars on them, but might give them a rental try for the fraction of the cost.
at the end of the day every dollar made is a dollar for the studio, but tell that to the shareholders!
i feel that since everything is just down to pure numbers in hollywood these days, thats also whats destroying them, because no one cares about good scripts or artistic value anymore.
10-23-09 | 08:09 PM
#5
DVD Talk Hero
Re: Renters might have to wait for new releases
If this happens, rental operations would most likely just buy the titles at retail and then rent those (as the article mentions that Redbox already does do in some cases). The first sale doctrine makes it legal for them to do so, and in many cases these days, you can buy DVDs on release week for practically wholesale prices (there's not much markup on DVDs, many retail places end up selling some titles as loss leaders the first week). The only really inconvenient thing about this would be the time frame. Usually rental operations get their titles before street date, so they have plenty of preparation time. If they had to buy at retail, they would really have to scramble and might not have things ready to go on release day. But a few days late is better than having to wait a few weeks. I'm sure that this is what would end up happening.
How things have changed. In the VHS days, most titles came out at rental pricing and then months later sell through pricing came into effect for retail sales. DVD really changed the whole market.
How things have changed. In the VHS days, most titles came out at rental pricing and then months later sell through pricing came into effect for retail sales. DVD really changed the whole market.
10-23-09 | 08:42 PM
#6
DVD Talk Gold Edition
Re: Renters might have to wait for new releases
Yeah, I was thinking the exact same thing as cultshock. In the "old days" of VHS the movies were available for rental only unless we - the public - wanted to shell out from $89 to well over $100 for the VHS release. Then, 4 - 7 months down the line the price would be reduced for the public. Just the exact opposite of what is being proposed now! Amazing.
I remember back in 1997 - 1999 when the rental companies were trying to push the studios to give them the DVDs first and only sell them to us (the general public) for outlandish prices - the same deal the rental companies had with VHS. We DVD purchasers were sweating for a month or two while negotiations were going on. The studios finally told the rental companies "sorry, no deal" and we all breathed a sigh of relief.
DVD really changed the face of this entire industry!
I remember back in 1997 - 1999 when the rental companies were trying to push the studios to give them the DVDs first and only sell them to us (the general public) for outlandish prices - the same deal the rental companies had with VHS. We DVD purchasers were sweating for a month or two while negotiations were going on. The studios finally told the rental companies "sorry, no deal" and we all breathed a sigh of relief.
DVD really changed the face of this entire industry!
10-23-09 | 10:15 PM
#8
DVD Talk Hall of Fame
Re: Renters might have to wait for new releases
Let's pretend it did happen. Rental places that are affected by this get around it by buying the movies instead. If the prices are lowered like they're saying(they won't and anyone that thinks they will are living in a dreamworld), the rental places will just continue to buy them at retail stores for even cheaper prices.
They also said it would just be DVDs that aren't rented for a short time, they didn't say anything about streaming rentals.
This idea isn't going to happen though.
They also said it would just be DVDs that aren't rented for a short time, they didn't say anything about streaming rentals.
This idea isn't going to happen though.
10-23-09 | 10:34 PM
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Re: Renters might have to wait for new releases
I think the effect on DVD sales if this move happens will be negligible. DVD sales taking taking a big dip has big reasons beyond the recession:
1) With the amount of big titles yet to be released dwindling to a very small amount, buyers have become even more savvy and are waiting for price drops on the small amount of DVD's they don't already possess.
2) Many DVD buyers have piles and piles of unwatched DVD's and have realized that watching some of what you already own makes more sense than adding more to a stack that remain unwatched.
3) For the most part, renters are renters, and buyers are buyers...trying to force renters to purchase a $20 DVD, will not have the desired effect. People that want to rent will just wait.
1) With the amount of big titles yet to be released dwindling to a very small amount, buyers have become even more savvy and are waiting for price drops on the small amount of DVD's they don't already possess.
2) Many DVD buyers have piles and piles of unwatched DVD's and have realized that watching some of what you already own makes more sense than adding more to a stack that remain unwatched.
3) For the most part, renters are renters, and buyers are buyers...trying to force renters to purchase a $20 DVD, will not have the desired effect. People that want to rent will just wait.
10-23-09 | 11:49 PM
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Re: Renters might have to wait for new releases
10-24-09 | 02:26 AM
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Re: Renters might have to wait for new releases
At the very least, if someone was *that* desperate they could always buy a movie used.
10-24-09 | 07:19 AM
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From: The Nova Catacumba Exhibition Center on Estrella De Tiago, an Asteroid orbiting the Moon.
Re: Renters might have to wait for new releases
ruin it!? i would say they save their customers money by offering
competitive prices. normally competition is always good for customers
in terms of pricing.
personally i am not effected, as i still purchase lots of new releases, but
i still find some studio moves too desperate.
this will only drive the public perception, that these studios represent the greedy corporate scum that has destroyed the economy, even more down.
on one hand i like spending money on movies, because i feel that my dollars
will contribute to producing good product in the future, but on the other
i feel that the reason why people are purchasing less and less, is not the
fault of redbox or the economy, but simply because most movies tend to suck lately and no effort is being put into new dvd releases!
most people have bought all the good scripted movies they love for their
collection by now and their are fewer new releases sparking interest.
there are just so many crappy movies people would get angry if they actually spent 20 hard earned dollars on them, but might give them a rental try for the fraction of the cost.
at the end of the day every dollar made is a dollar for the studio, but tell that to the shareholders!
i feel that since everything is just down to pure numbers in hollywood these days, thats also whats destroying them, because no one cares about good scripts or artistic value anymore.
competitive prices. normally competition is always good for customers
in terms of pricing.
personally i am not effected, as i still purchase lots of new releases, but
i still find some studio moves too desperate.
this will only drive the public perception, that these studios represent the greedy corporate scum that has destroyed the economy, even more down.
on one hand i like spending money on movies, because i feel that my dollars
will contribute to producing good product in the future, but on the other
i feel that the reason why people are purchasing less and less, is not the
fault of redbox or the economy, but simply because most movies tend to suck lately and no effort is being put into new dvd releases!
most people have bought all the good scripted movies they love for their
collection by now and their are fewer new releases sparking interest.
there are just so many crappy movies people would get angry if they actually spent 20 hard earned dollars on them, but might give them a rental try for the fraction of the cost.
at the end of the day every dollar made is a dollar for the studio, but tell that to the shareholders!
i feel that since everything is just down to pure numbers in hollywood these days, thats also whats destroying them, because no one cares about good scripts or artistic value anymore.
In the last five years I have seen only 2 Movies in the Theatre, and I gave up watching Network and Cable TV three years ago. The Vast Majority of the Movies and TV Shows in my Collection are from the 1960s and 1970s. I have more TV Shows from the 1950s than I do the 2000s. IMO The newer Films and Series simply don't cut it!
10-24-09 | 10:19 AM
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Re: Renters might have to wait for new releases
How does that work exactly? It's always been my understanding that dvds sold to a consumer are for "private use only" while dvds sold to a rental business are sold at a higher price because they're using them to make a profit. If what you say is true, wouldn't it be in a rental's best interest to always buy their rental dvds at the same retail places consumer's do now? Just trying to understand.
10-24-09 | 11:27 AM
#14
DVD Talk Gold Edition
Re: Renters might have to wait for new releases
How does that work exactly? It's always been my understanding that dvds sold to a consumer are for "private use only" while dvds sold to a rental business are sold at a higher price because they're using them to make a profit. If what you say is true, wouldn't it be in a rental's best interest to always buy their rental dvds at the same retail places consumer's do now? Just trying to understand.
I imagine video rental outlets pay an extra fee on top of the disc cost in order to legally rent the films from their store.
I don't think they're paying $24.95 per title and then rent the discs out for $4.00/per night. They would only have to rent the disc out for six nights and they've made a profit.
Chime in you happen to know how this model works.
10-24-09 | 12:05 PM
#16
Banned
Re: Renters might have to wait for new releases
I don't go to theaters, so I usually rent a movie from Redbox (used to go to my local video store, which is cheaper than Redbox, but I don't usually need 5-7 days to watch one movie - so it's pretty much a waste), return it the next day, and decide whether or not I want to purchase it. If I decide to purchase something, I wait to get it for under five bucks. So bottom line, I rent then buy to reduce my stack of blind buys.
10-24-09 | 02:01 PM
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From: Fayetteville, Arkansas
Re: Renters might have to wait for new releases
They were higher quality tapes too. When I used to buy used VHS from a video store they were always much heavier than the ones I bought in a store. Someone told me they were designed to be watched multiple times, whereas the ones made direct for consumers were cheap ass.
10-24-09 | 02:06 PM
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From: Fayetteville, Arkansas
Re: Renters might have to wait for new releases
I discovered a trick there: When a new dvd is due to come out on a Tuesday I'll make it #1 in my queue and then mail a movie I already have at home the preceding Saturday. Nine out of ten times that I've done this it works and I'll get the new movie next.
10-24-09 | 02:34 PM
#19
DVD Talk Special Edition
Re: Renters might have to wait for new releases
Rental & retail stores don't pay the retail price if they go through a distributor. Back when VHS tapes were retail price, between $89-$105, the dealer cost would be between $65-$75. With DVDs rental & retail stores pay between $8-$12 for a $19.95-$24.95 DVD.
10-25-09 | 12:06 AM
#20
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Re: Renters might have to wait for new releases
How does that work exactly? It's always been my understanding that dvds sold to a consumer are for "private use only" while dvds sold to a rental business are sold at a higher price because they're using them to make a profit. If what you say is true, wouldn't it be in a rental's best interest to always buy their rental dvds at the same retail places consumer's do now? Just trying to understand.
I get a kick out of the original article pointing to Redbox's growth (113%) vs. the decline in sales (13.5%). The overall amount is nowhere close to being on par to consider those as a rational comparison. Additionally, Redbox is still a relatively new company that is going to see exponential growth as it establishes itself, whereas "Hollywood" is a aged industry.
10-25-09 | 01:56 AM
#22
DVD Talk Limited Edition
Re: Renters might have to wait for new releases
All I can say is that, should this come to be, it doesn't look particularly good for the seemingly struggling rental industry.
10-26-09 | 09:08 AM
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Re: Renters might have to wait for new releases
There rental window will not work. They may get a little revenue but I don;t think we are going back to the day where we would have to wait months to buy a new release or pay $90. I used to be the guy who would buy 1,2, or 3 titles every week. No $$ to do that now so I buy used. Putting aside the fact that most movies released these days just do not interest me. Saw 42, Scartyy Movei 11.5, remake, remake, remake. Not thanks. Give me a Hangover or Star Trek - now those were exceptional. I will buy those, eventually. I buy from pawn shops for $2 or less a title. They usually have the big titles after a few weeks. Then i take a portion of those and get $4 or more a title in trade at my local used CD/DVD store. A win-win situation and I have saved thousands of dollars.
If my memory is correct - Blcokbuster is the one that declined the rental window model. They wanted the ability to get the titles at discounted prices so there profit margin would increase after 6 rentals instead of 25 rentals. It was there doing and there undoing. Correct me if I am wrong.
If my memory is correct - Blcokbuster is the one that declined the rental window model. They wanted the ability to get the titles at discounted prices so there profit margin would increase after 6 rentals instead of 25 rentals. It was there doing and there undoing. Correct me if I am wrong.
10-26-09 | 09:19 AM
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Re: Renters might have to wait for new releases
I think the effect on DVD sales if this move happens will be negligible. DVD sales taking taking a big dip has big reasons beyond the recession:
1) With the amount of big titles yet to be released dwindling to a very small amount, buyers have become even more savvy and are waiting for price drops on the small amount of DVD's they don't already possess.
2) Many DVD buyers have piles and piles of unwatched DVD's and have realized that watching some of what you already own makes more sense than adding more to a stack that remain unwatched.
3) For the most part, renters are renters, and buyers are buyers...trying to force renters to purchase a $20 DVD, will not have the desired effect. People that want to rent will just wait.
1) With the amount of big titles yet to be released dwindling to a very small amount, buyers have become even more savvy and are waiting for price drops on the small amount of DVD's they don't already possess.
2) Many DVD buyers have piles and piles of unwatched DVD's and have realized that watching some of what you already own makes more sense than adding more to a stack that remain unwatched.
3) For the most part, renters are renters, and buyers are buyers...trying to force renters to purchase a $20 DVD, will not have the desired effect. People that want to rent will just wait.
Unless it's some summer blockbuster or some other movie that I must own right away I just wait until the price drops. If it's some movie that I'm somewhat interested in then I can wait until it goes in a $5 or less dump bin.
10-26-09 | 09:21 AM
#25
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Re: Renters might have to wait for new releases
Wait. I'm not sure how this would work? A rental outlet could clean up by purchasing the retail copies of a flick and be the only place in town to have it for rental, no?