16 February, 2008

"How much for digital?"

Seth's Blog:

"The movie studios are starting to get excited about renting movies digitally (via Apple and others). The pricing seems to be modelled on Blockbuster (+). Figure $3 a rental, another buck or so for HD. That seems 'fair', because it's in the same range as we're used to.

But wait.
Blockbuster buys DVDs for $15 or $20 (probably a lot less in volume, but I have no clue what the real number is). The studios have to pay for duplication and warehousing and marketing and they take a risk with every pressing that they'll have to shred the leftovers.

Blockbuster then rents them out 30 or 40 or more times each, meaning each rental costs Blockbuster fifty cents. Not to mention rent, surly clerks, cost of capital, advertising, etc. Or, in the case of Netflix, stamps.

In the case of online rentals, all of these intermediate costs immediately disappear. Gone.
So, why try to mimic the current model when it comes to pricing if the costs are mostly gone?"


Because the studios are thick rapacious bastards (as evidenced from the WGA strike) who are just interested in short term minimal gain from early adopters rather than growing the market exponentially with a fairly priced and simple service. Or was that a rhetorical question?


Anonymous said...

I thought rental stores like Blockbuster had to pay a couple hundred pounds for new releases -- which is why when you buy a new release DVD from, say, HMV it will have "not for rental" printed on it.

I may be wrong.

Robin Kelly said...
This comment has been removed by the author.
Robin Kelly said...

Edited repost so it makes more sense ;-)

It's true they used to have to. The disks are meant to be sturdier and last longer and don't have all the extras.

But the retailers complained about the high cost and the limited supply of them.

Lovefilm started just hiring out the retail version instead, as it had lots of people waiting in the queue. They were threatened by the studios, I think.

I don't know what happened next but, years later, I hardly ever see rental only releases with online stores and it's usually the retail version.

Jon Peacey said...

I don't know any of the ins and outs but a lot of DVDs still have a yellow box stating 'for retail only' printed on the sleeve. So presumably some companies have some restrictions.

Robin Kelly said...

That's a point. I suppose I mainly rent independent and foreign language films (they have more naked ladies in them) and they may be less likely to have special DVDs or care about it.

But I have been pleasantly surprised to rent a blockbuster and find it was retail only with all the extras.