In this economy everyone is looking for ways to decrease costs and increase income, but evidently that might not be good news for those of us who prefer to rent movies. While Redbox has already filed suit against
Universal and now Fox in response to them imposing a 30 day delay, starting in October, Warner will simply "change its terms". The interesting twist here is that the new 28 day delay from Warner also applies to "mail-order subscription services" -- but there is a new day-and-date revenue sharing option. This should be fun to watch play out, but we'd be shocked if Netflix and the studios didn't work something out, and hope that Netflix won't also have to involve the law in order to protect its first-sale doctrine rights.
Read - Redbox files suit against Fox
Read - Warner offer kiosks titles 28 day delay
posted Aug 14th 2009 12:51PM
Well gee whiz - this will surely convince me to pay $29.99 to own a disc of every Warner and Fox movie in which I have a passing interest.
If only there were some less expensive alternative. Perhaps something that doesn't involve discs at all...
To be honest, though, most people will not know why new movies aren't available at Redbox.
When a movie is released for purchasing, I think there will be a number of people who will break down and buy it. Of course, people like you and I will certainly be pissed off at the movie studios for doing this that we wouldn't, but I think we're in the minority.
The rest of the population, though, will just skip the movie altogether and when it's available 30 days later, may very well have lost interest and just won't see it. Though piracy doesn't play into this particular situation, the following phrase still applies:
Piracy doesn't hurt your product sales; obscurity does.
Rob
You are not being forced to buy the titles, they can still be rented from a store like Blockbuster or Hollywood Video where a new release title, DVD or Blu-ray, is $2.99.
They are only delaying the release to rental kiosks that charge $1.00 per and mail-order subscription services like Netflix. Because these services diminish the value of the product to quickly.
This is a good move for the studios because it builds value back into the product. The studios are not making movies to break even they do it to make a profit.
Perhaps not a popular move with consumers who want "who ever is cheapest" but a very smart move by Warner Bros. I hope all the studios follow suit.
Downloads, PPV & VOD all used to be delayed behind DVD and based on their performance..or lack there of & will most likely see the 30 - 45 day delays again in the near future.
A good business model for the studios is far more important than convenience for the consumer long term.
If not the quality of new films will drop due to the smaller budgets available based on the loss of revenue in the name of convenience for the consumer.
Films like The Lord of the Rings trilogy or The Watchmen won't be nearly as "visually astonishing" because the studios won't risk the amount of money necessary to produce & distribute. Gone will be the $150 - $200 million dollar epics.
As consumers we can't have it both ways. We can't expect the pinnacle in film making for the least amount of money possible, it simply isn't realistic.
If the studios are threatened that a $1 rental kiosk is taking their money, then the studios should man up and make .50 rental kiosks.
It is that simple.
JDS, $2.99 really? last time I checked, the rental prices are anything but $2.99. who are you kidding? are you with the studios or what?
Bill,
Just yesterday I rented Race to Witch Mountain & 17 Again on Blu-ray from Blockbuster for my kids. Thet were $2.99 per & one was free because I had already rented 5 movies this month. Took them back today & got I love you man on Blu-ray for $2.99
This is dumb, I usually buy movies I've already seen. If I have to wait 30 days, (and wait for popularity to die down some) this will only delay my decision to buy movies I haven't seen yet.
You guys are NOT reading it correctly.
The titles will still be available to rent on release day.
Just not for $1 via a kiosk & not from a mail order service.
Can still be rented on release day from Blockbuster or Hollywood video.
And they still "may be" available from kiosk or mail order if they agree to charge more. IE: "a new day-and-date revenue sharing option"
i'm not an expert on rentals, but why does it matter how much blockbuster and hollywood video charge for a rental? Doesn't warner and others just charge a flat rate to the retailers no matter who it is?
It shouldn't matter if the movie is rented for $1 or $5, warner should get the same amount of money... maybe that's not how it works, but it seems like that's how it should work to me.
@Jay, Now that I really think about it, I'm pretty sure there is some sort of revenue sharing agreement in place or the studios wouldn't care who bought the discs as long as they bought them. The more discs they sell the better, right?
And Doctrine of First Sale notwithstanding, it just doesn't make any sense that a rental company could buy a 10 or 15 dollar movie and makes hundreds of dollars in profit off of its rental and not have to share any of that with the content creators. There is a huge gap between prohibiting rentals at all and letting rentals companies make an absurdly disproportionate amount of profit off content you paid to create. According to a PBS Frontline special, rentals and DVD sales make up almost 50 percent of given film's revenue:
http://www.pbs.org/wgbh/pages/frontline/shows/hollywood/business/windows.html
Notice they don't just say revenue from "sales" but specifically "sales and rentals".
JDS I fail to see your logic about big budget films. they generlaly make money in theatres, the dvd blu ray market is only extra icing on the cake
wrong......Watchmen barley broke even
some films may outperform estimates but many or most need DVD rentals & sales just to break even
and this is not about breaking even, when a studio invests $150 - $200 million they aren't hoping to make a $10 million dollar profit, they are looking to triple or quadruple their investment
any one in any type of business is not doing it to just 'get by' they do it to flourish
as a culture we just want everything for WAY BELOW what it costs to produce, we are spoiled.....blu-ray players, blu-ray movies, iPhones...we want everything for around a third of what the raw materials cost.....
Watchmen barely broke even because watchmen SUCKED. Watchmen is NOT indicative of the movie industry as a whole. Lord of the Rings, all of them, made it HUGE at the box office, so did both Batman movies, and most of the big epics. You can make money off of 200 million dollar movies, just not off of such movies when the script is 3 hours long and makes everyone who sees it want to die.
Nick hit the nail on the head with that one. JDS, you are the one that is not getting it. If studio is so concerned with profit margin. make better film. I rented Watchmen on Blockbuster 3 out plan. I got it on blu ray, I still think it was a waste of my time, and my money, to have watched that film.
studio don't need to have big budget, get a good screenplay going, and you can make profit. it is as SIMPLE as that.
JDS - you're not actually addressing the point. Yes, plenty of movies bomb at the theater, but if they do, it's extremely rare they "make it up" in DVD sales. Movie budgets are set by assumptions of how well the movie will do at the box office.
Take a look at Serenity. Most fans think it did very well because they count DVD (and HD DVD, etc) sales as if they mean anything. The industry, however, considers it a massive flop. The net income (excluding money kept by the theaters, spent on marketing, etc) was barely half that of the movie's budget (even the gross revenue was slightly lower than the film's budget.) There's a reason Universal never tried to get a sequel done, despite the enthusiasm of Firefly's fanbase.
DVD sales obviously offer the studios a way to claw back some money to help deal with big budget flops, but they're not the metric used by the studios, and if DVD and Blu-ray and downloads and whatever else went away tomorrow, that would not be the end of huge budget megablockbusters. Not by a long shot.
Nick,
The point isn't about Watchmen being a good or bad movie, the point is that a studio put up $200 million to make it.
It's about the material investment in every movie.
Most films fail to break ever or actually turn a profit.
The studios gamble.
This is just another way to balance the risk.
IMO the 30 day window would be more than fine for netflix if they were able to secure movies to stream in that same 30 day window. I could wait 30 days to watch movies if it meant new releases for streaming. (and I think most netflix subscribers would as well)
that's the point. there is ZERO motivation for the studios to allow you to be able to stream a day & date release when they make MUCH more money when you get in your car & drive to Blockbuster Video & rent it for $2.99
where is the value in a day & date release that you can watch for FREE streaming via a flat rate mail order service?
You can argue for the studios all you want JDS but what it comes down to is Netflix and Redbox changed things forever.
People are starting to wise up. Why buy a movie for $15-$30 when you can rent it for a $1 or $2? and if I want to watch it again...I'll just rent it again. I'd have to watch a movie at least 15 times before buying it became a smart purchase.
Sure, a studio exec might make a few million less this year but he jsut has to deal with it or figure out another way to make more money. It's business...everyone want a bigger piece of the pie but there is only so much to go around...so they have to do what they have to. Maybe it means they pay brad pitt 15 million less for his next movie, maybe it means they don't hire christian bale for every role ever, maybe they cut costs by hiring no name actors.
cutting off the millions of netflix customers doesn't seem smart though because you know what there is already enough movies on there to watch for a few lifetimes.
Way to go Hollywood greedy bastiges. You are going to take the only positives in the rental game and screw it up. All this will do is save me a trip to redbox, and just torrent it all. NICE.
You can still rent same day on VOD.
And that VOD which allows 1 viewing is actually more expensive than renting day & date from Blockbuster
Hollywood = EVIL
Always trying to screw the consumer
These monkeys just don't understand. When you put all these restriction on people, they will just turn to the illegal ways of getting their media.
And even If Hollywood put a block on illegal download and file sharing. There is one thing the cannot stop:
THE CHINESE !!!!!!...... 5 bu-wrays for 10 dollar, u get fwree egg roll with purchase.
@kevon - This isn't the 60's. Racism isn't funny anymore. Grow up.
@imonit... what racism. I love the Chinese. LOL.
It appears that the Doctrine of First Sale does indeed uphold people’s right to rent movies they purchase. So how is it legal for the studios to restrict sales to some rental businesses but not all of them? Can rental companies pick up their discs at Amazon or do they have to buy their discs through different disitribution channels than consumers due to licensing agreements with the studios? I know with digital streaming or downloads there has got to be some form of revenue sharing (the download/streaming services only need to buy one copy) but how do the economics of DVD and Blu-ray rental work?
It would be interesting for Ben and Steve to bring somebody on the podcast with industry connections to explain how money is divided up and who gets what for the various kinds of rental services. For example, how will 10 dollar a month subscriptions for all you can eat streaming plans ever generate the kind of revenue that content providers receive today? Is 10 dollars a month a reasonable price for access to every bit of content ever created? Are rental companies really allowed to makes hundreds of dollars by renting a 10 or 15 dollar DVD without sharing any of this profit with the content creators?
@JDS Your arguments make no sense. I don't think the studios make anymore from a $2.99 rental or for that matter a $4 DVD rental as opposed to a $1 rental at Redbox or Netflix. Unless they have some type of revenue sharing agreement in place perhaps.
I mean don't the rental places buy the DVD's to rent to people and the buying of the DVD's is where the studios make money, not from the actual rentals. It seems that the studios would be cutting down on the number of DVD's they sale if they don't allow these kiosks to jump in and load up with with DVD's on the initial release date. Seems like less demand and less DVD's would be purchased by the kiosks if they had to wait 30 days.
Now, I realize and believe I might have heard of Blockbuster (and I would guess some others) might have revenue sharing deals in place in some cases where they pay less for the DVD's, but share revenue. I'm not really sure about this though. It seems regardless, that money would sort of be coming out of one pocket and going into the other of the studios and in the end I don't know that it changes their revenue much.
Hell, I hope Netflix DOES involve the Law. Studios just keep pushing and pushing. No one is making me buy their products. I purchase what I choose to purchase. Studios always seem to forget that Consumers do not need them one little bit. Consumers may choose to spend money on them, and strongarm tactics do not play out well.
@Paul, I totally agree with you. Redbox has completely changed the game for casual renters of DVD's. I have 5 within a couple miles of my house, as well as a Blockbuster. Once you've gotten used to renting for $1, along with the convenience of checking on availability and reserving a copy from your home computer, it's difficult to go back to the lines and hassle of $3+ rentals at Blockbuster. JDS might be right, if a bit obtuse, about some of his arguments. But once consumer behavior has been altered producers must change strategies to favorably meet those needs. Just ask the record companies about how first sticking their heads in the sand about Napster and then trying to punish product purchasing consumers (Sony rootkits, proprietary DRM) has worked out. Geez, I just wish that my local Redbox's carried Blu-Ray...
Netflix and the studios will work something out, netflix is too big for them not to. They are too smart not to realize that people sometimes rent movies that they'd like to buy, but aren't sure of. If I were the studio, I'd force netflix to include a "Buy this movie" option, kind of like what Gamefly does. If the user can click a button and own a movie they have in their possession at Amazon prices, getting the case and extras in the mail, I'm certain that discs would fly off the shelves. Hell, I know I'd use it, and I'm willing to wager that many of you would as well. This way the studios turn a pain-in-the-ass rental business into a money making retailer, and Netflix gets the studios off their back.
Win-win.
Nick,
Yes, Netflix will agree to Warner's "new day-and-date revenue sharing option" and raise their prices on day & date titles.
Netflix isn't to big for the studios based on the amount of revenue the studios are losing based on Netflix all you can eat flat rate model.
The studios want ala carte pricing on day & date titles for the first 30 - 45 days.
The studios know that the consumer will go to the product where ever it is available.
No, they won't. People will wait for 30 days and rent then. Most movies come out months after they've been in theaters, and if people cared that much about a particular movie, they'd purchase that movie. This is effectively moving the release date back another month for most customers.
Nick,
You really believe that?
Call me when the shuttle lands.......................
BTW: None of what I am saying is based on my personal habits as a consumer, this is only about business.
If you honestly believe that the consumer is going to wait 30 - 45 days then prepare to be shocked as the flock [of sheep] migrate to the product, where ever the product is available.
The studios couldn't pick a better time to do this. Coming Soon; Wolverine, Star Trek, Transformers 2, Harry Potter, G-Force, Crank 2, Terminator Salvation, Monsters Vs. Aliens, Up, Year One, Land of the Lost etc.......
To me this sounds more like your "sour grapes" over your personal DVD rental habits being disrupted than anything else.
And the average consumer is impatient, the studios know this. Try waiting in line at Starbucks if you want an example of how impatient we have become...
Just watch and see.
All of those are movies that people who care enough about them to "flock to the product" are planning on buying. I don't know about you, but I have my copies of Terminator Salvation and Star Trek already reserved on Amazon. (Well, Star Trek at least, but they'll email me when TS is available for preorder). You have to remember that most of the people on netflix have become comfortable with the netflix meme and aren't going to want to change. But our arguing is academic, time will tell.
If I've already wanted the 4-6 months to watch the movie from it's theatrical release, I can wait another 30 days. Let the babies at Warner have their way on this one so everyone can see them look like complete fools.
Just another reason to stick with torrents...
You guys can wait 30 days to watch the movie, I'll watch it 30 days before street date. If my math is correct that is a 60 day difference.
+1 for EuReKa
Seriously fuck these movie companies .... I hate this shit .... This is why people get frustrated and pirate the shit. WHy they could make movies easier for people to get to is beyond me.
Actually, the studios do make more with Blockbuster than they do with Redbox, and it has nothing to do with revenue sharing.
It's all about 1 day vs 3 day rentals.
I'll stick with simple numbers for this example.
Assume for new release X 10 people per day will want to rent the movie for the first week. To cover this demand Redbox has to buy 10 copies, Blockbuster has to buy 30 copies to cover the same demand because you can keep the movie longer.
I don't begrudge anyone trying to make a fair profit. But this is downright stealing.
The studio had an idea. The movie. They produced the movie and put it up for sale. They make their profit in theaters and when they sale a copy to Redbox. Redbox has an idea. Redbox buys thousands of copies, and rents them for $1 a day. Redbox rightfully bought these copies.
They had an idea. they made a profit on this idea. Now the studio thinks that it deserves a portion of the profit because the original idea was theirs. This is downright theft. Why aren't they going to Walmart and saying we want a share of your profits because you sale movies cheaper than every one else?
Just because Redbox's business model(high-volume, low margin) is different from Blockbuster's model(low-volume, high margin) does not mean they have to pay a higher cost.
This is not how business works. If you can't survive on your OWN profits, you shouldn't be in business.
Jeff
No that is not how business works & Blockbuster's model is not low volume high margin. Blockbuster buys & stocks far more copies per title than the kiosk operators or Netflix. You never hear about Blockbuster being low on titles though you do hear about long waits on Netflix.....
Point blank there is no good reason for a day & date brand new release major motion picture to rent for $1 the day it streets.
Honestly is there that little value in entertainment for you?
Try to peruse a "dollar store" to see exactly what $1 gets you. Or check out the dollar menu at Wendy's.....your opinion is totally unrealistic. Why should the studios leave so much "breakage" on the table? It's like throwing away money.
This is a smart move for the studios that will build VALUE back into their product. If it costs $8 per during the day & $10+ per at night at the theater then why would it be $1 to bring it home on release day? How could that ever make sense?
Redbox has far less overhead that Blockbuster. Netflix also has less overhead as well with NO RETAIL FOOTPRINT.
The B&M retailers that established VHS & DVD deserve something for the effort and they have a lot more overhead than kiosks or mail-order subscription services.
Day & date titles should rent for a premium or $2.99 - $3.49 for the first 30 - 45 days of release.
The studios are going to do what they want & consumers will bend to their will, just watch.
If a consumer wants to see the new Star Trek or Transformers 2 or any other day & date new release they are going to go where it is available. And when a consumers child wants to see the new Hannah Montana you can bet that those parents will be renting from Blockbuster....
Many doubted the iphone when it debuted at $499 & $599 in an exclusive deal with AT&T........here we are 20 million iPhones later...the consumer bends like a reed in the wind.
JDS, let's not forget that blockbuster is in serious financial trouble. You might have faith in the way they do business, but few others do.
So you want Redbox to pay for Blockbusters bad business model? It is not up to Redbox to bailout the studios or Blockbuster. If they are not making enough profit they need to change there business model. It is not Redbox's fault that Blockbuster, et al. have high overhead.
The studios have to do what they have to do, to make a profit. If they are not making a profit, they need to raise the cost of tickets or the cost they sell DVD's to Redbox. But as far as I am concerned, they are stealing if they require Redbox and Netflix to do some profit sharing scheme.
If they don't want to sell DVD's to Redbox for 30 days, that's their right. But if there was ever a bad business model, that has to be it. Either customers will just wait, or they will lose interest. There are certain movies that I wouldn't wait for, but those are ones I would buy anyway.
Why does Blockbuster deserve anything? They got what they deserved. They were profitable for many years. Now they are losing to companies that saw a change in how consumers shop. Studios have failed miserably. They have taken years to adjust to what consumers want, and they are still years behind.
And despite what you say, consumers control the market. If consumers are not interested in a product or company, they fail. Which is how it should be.
I will not bend to some company that says I have to pay $4 for something I can get for $1. Especially when I don't need it in the first place. They can charge what ever they want, but it is up to ME whether or not I will spend MY money on it.
Are you some sort of PR rep for Blockbuster and the studios? Because you are doing a horrible job.
People buy iPhones(myself included) because they see value in it. I think that it is worth the price. Random movies for $4, I do not.
Nick
Which has nothing to do with the conversation except that this may breath new life into that company.
Try to stay on topic.
I don't care where the consumer rents the DVDs.
This isn't about my personal habits as a consumer.
I am simply talking about why this makes sense for the studios.
And from a business perspective it makes really good sense.
Expect other studios to follow suit.
Jeff
That's the point, you can't get it for a dollar.
Maybe you could [for a period of time] but soon you can't.
And just by being on this website makes you NOT the average consumer.
You are to well informed.
The average consumer is uninformed.
They will not nor will their children lose interest.
We, the consumer, think we are in control, that is nothing more than perception.
We are NOT in control.
We can agree to disagree but this move will work.
Regarding Blockbuster's business model, that's not the point. Blockbuster, Hollywood Video & any other B&M retailer will be willing to share the revenue PER rental & that is what the studios want. Not an ocean of flat rate rentals yielding very little. Even if they do less business the studios will make more money. And the fewer copies being rented makes the title that much more valuable, in demand etc....so in this instance less is more.
The studios want to get paid every time a DVD leaves the store.
I do disagree. This is nothing more than another DRM fiasco that will anger consumers even more. They have no right to mooch off other companies profits---companies they rely on in order for survival. Don't bite the hand that feeds you. They have already bitten the consumers, now they are going after their distributors and retailers. The MPAA is traveling down the same road the RIAA has already traveled. Yet they can't even see the forest through the trees.
Jeff
Please understand, the DRM fiasco you mentioned & this current issue are non-issues to the average consumer.
The only controversy will be felt here among those "in the know"
Most consumers don't care.
Most likely the kiosk vendors & Netflix will agree to the "new day-and-date revenue sharing option" and life will go on.
Meaning both the kiosk vendors & Netflix will have the new release day & date titles on release day but for a higher price or not included in flat rate programs.
The average consumer will see the product they want & rent it.
I think JDS has it wrong -
Consumers may be uninformed but they are not complete idiots. This may give Blockbuster a bump initially, but once consumers figure out that they can wait 30 days and rent the movie for cheaper that is what they will do.
I think Jeff is right on the money here. This will piss consumers off. It is this exact sort of thing that encourages people to pirate movies, especially when a DVD quality copy will be available online the day the movie is released for sale.
I'm not saying that pirating is ethical, but consumers have a lot less qualms with it when they see the studios acting in an anti-competitive manner (i.e. gouging us for money). So far the studios have been able to escape the problems that the music industry has been having, largely because internet speeds were pretty sluggish for a movie. It seems that every provider now offers over 10 Mb down and much faster in many cases.
As a consumer this pisses me off to no end, I find it outrageous that copyright law can enable the studios to sell a movie to consumers yet restrict how rental companies can use those copies to make a buck. It is completely absurd and is yet another example of how corrupt our political system is (copyright law has been bought and paid for by these companies).
JDS obviously works for a movie studio or something. All of his points are for how this benefits the movie studios and how raising the prices is somehow better for the consumer. It is ridiculous to think this helps the consumer in any way.
Netflix, redbox, or whatever should be able to charge whatever they want for the media. They buy it, they own it, they can do what they want with it. Maybe they should give away a free rental with $100 in grocery purchases.
Movie studios are just mad that they didn't think of it first and that they are always behind the technology curve. Same with the music industry. They want to cling to an antiquated publishing model and revenue stream and that just isn't feaibile in this day and age.
They need to embrace the way it is now and try to reconfigure their business to best make use of current technologies. Mabe Warner should create their own rental kiosks and make their movies available in them 30 days before they sell them to Netflix or Redbox for $3. If supply and demand really work that way, then people will go to those kiosks and rent them according to JDS.
To clear up some stuff on Blockbuster.....rentals there are like $4.99 or 5.99. Unless you are a member of one of their programs or season passes, you can't rent a new blu-ray for $2.99. It just doesn't happen.
Blockbuster also has revenue sharing agreements with some studios. Basically the studio sends them the movies to rent and receives a certain share of the profits. After a period of time, like 60 days, Blockbuster is required to break all the discs and send them back to the studio.
I personally watched a guy doing this with like 100+ copies of Juno. He was cutting each one with scissors and packing them up to send back to whoever. He informed me that every copy that didn't come back resulted in a fine.