Lost DVDs?
The motion picture distribution industry may very well be in its death throes. Blockbuster posted a net loss of $36.9 million last quarter, with a 22% drop in sales. Initially they were outmatched by Netflix, which allowed consumers the ability to rent a video from their computers and either watch movies online or have them shipped to their home the next day. The post office loved this idea because the program kept their business churning, at a time when they were seeing enormous losses. Not to be outdone, Blockbuster quickly set up their own version of Netflix with a service called “Blockbuster Online,” which got rid of late fees and also allowed users the added convenience of being able to turn their movies in at the store if they so desired. Now DVDs are renting like hot cakes from red kiosks that can be found in grocery and convenience stores and movie giants are seething.
Late last year, Universal Pictures ordered its distributors not to sell its DVDs to Redbox until the new movies had been on sale for 45 days. Fox and Time Warner also decided that their top movies should be out for at least 30 days before being available for $1 through the Redbox kiosks. This decision is being contested in court by Redbox and Netflix, who are also being affected by these new regulations. According to Time Warner CEO Jeff Bewkes, the $1 rentals should be treated like the “cheap show” movie theaters with an appropriate window of time for the entertainment industry to make the big bucks off consumers. Yet, Mitch Lowe from Redbox argues that they can afford to pay the studios more because they’ve “significantly reduced the cost of delivering movies to consumers” and they garner more repeat business. Motion picture giants are primarily worried that the undercutting of prices is what will jeopardize their whole business model.
In response to a relatively dismal quarter, posting just a $1.02 billion profit, Blockbuster has decided to make some changes. They’re on-board with the motion picture companies’ idea to delay cheap rentals for 30 days after films are released on DVD. After all, Blockbuster does sell DVDs, as well as rent them. They’re also planning to expand their popular DVD-by-mail service to rival that of Netflix’s and deploy 2,500 DVD rental kiosks like Redbox has. (Although, Redbox kiosks will grow to nearly 22,000 by the year’s end!) It seems that Blockbuster is always one step behind its competitors, which may be a sign that the aging giant will soon be extinct.
There may be other ways to work with a “window” of opportunity for DVDs. Sony, for instance, is working on a pay-per-view movie service called “Bravia TV,” which would allow consumers to get movies instantly beamed to their television set just after theater releases but before rental releases. While consumer demand is encouraging more films to be delivered in a quick, convenient method, there are several problems with this business model. For one, not all TV sets are equipped with the technology to handle this new ordering method. Secondly, how many Americans are willing to spend $40 to see a movie, when they could just wait another month and spend $5 to rent it or buy it immediately for $20?
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