Possible Rental Delay Coming For Major New Releases!

[Morbid Angel]

This could be the blow that finally does Blockbuster in if this does indeed come to fruition.

By Ben Fritz
October 23, 2009

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.

http://www.latimes.com/business/la-f...tory?track=rss

[abhorrent scowl]

If the delay was applied across the board (red, net and BB), I have to wonder how big of an impact it would have. There are a handful of major hits that I could see people buying more if there was a delay before they could rent it. But those movies are in the minority. We rented a shitload of that horrible Year One, but can you see many customers thinking "I can't wait a few weeks to have it, I must own it NOW!"
I tend to think that for most movies and most customers, the rental release date would just become the new de facto street date.

[Ghost of AtlanticVamp]

If the delay was applied across the board (red, net and BB), I have to wonder how big of an impact it would have. There are a handful of major hits that I could see people buying more if there was a delay before they could rent it. But those movies are in the minority. We rented a shitload of that horrible Year One, but can you see many customers thinking "I can't wait a few weeks to have it, I must own it NOW!"
I tend to think that for most movies and most customers, the rental release date would just become the new de facto street date.

I agree. A great deal of the flicks that have come out in the past few years have been real turkeys. I can't imagine people would go out of their way to lay out $15-20 just to say they saw a lot of them.

For a minute, from the thread title, I thought it was another "Blockbuster can't pay their suppliers" issue. At least this goes across the board.

[Xtreme Rebel]

And it's not like we wouldn't have the retail in the store on the primary street date anyways.

[Morbid Angel]

If the delay was applied across the board (red, net and BB), I have to wonder how big of an impact it would have. There are a handful of major hits that I could see people buying more if there was a delay before they could rent it. But those movies are in the minority. We rented a shitload of that horrible Year One, but can you see many customers thinking "I can't wait a few weeks to have it, I must own it NOW!"
I tend to think that for most movies and most customers, the rental release date would just become the new de facto street date.

I don't know. Based on my experience from working for Blockbuster, I've found American movie viewers lack the discipline and maturity to except a later rental date. "Hot new releases" are like crack to them. It doesn't even matter if the movie is terrible, they "must" have it immediately upon release. Frankly, this is in large part Blockbuster's fault because of the old infamous "guaranteed in stock" gimmick. What happens when a customer comes in the store and sees retail copies of Spiderman 4, but not a single rental copy? I suspect they'll throw a hissy fit like a spoiled child and storm out of the store. This is simply the way they've been conditioned to operate. Now admittedly I haven't worked for BB since '06, but I would imagine this immature mentality is still very much in place. Most of the more mature customers that will watch movies more than a week old have gone to Netflix When I worked for BB, we had customers banging on the doors nearly every Tuesday just so they could get their grubby little hands on the "hot new releases" the minute they were put up on the shelves. It really disgusted me and played a part in my decision to finally quit.

I'm betting that horrible Transformers: Revenge of the Fallen rented shit loads too huh? *sigh*

[abhorrent scowl]

I don't know. Based on my experience from working for Blockbuster, I've found American movie viewers lack the discipline and maturity to except a later rental date. "Hot new releases" are like crack to them. It doesn't even matter if the movie is terrible, they "must" have it immediately upon release. Frankly, this is in large part Blockbuster's fault because of the old infamous "guaranteed in stock" gimmick. What happens when a customer comes in the store and sees retail copies of Spiderman 4, but not a single rental copy? I suspect they'll throw a hissy fit like a spoiled child and storm out of the store. This is simply the way they've been conditioned to operate. Now admittedly I haven't worked for BB since '06, but I would imagine this immature mentality is still very much in place. Most of the more mature customers that will watch movies more than a week old have gone to Netflix When I worked for BB, we had customers banging on the doors nearly every Tuesday just so they could get their grubby little hands on the "hot new releases" the minute they were put up on the shelves. It really disgusted me and played a part in my decision to finally quit.

I'm betting that horrible Transformers: Revenge of the Fallen rented shit loads too huh? *sigh*

I can't disagree with your assessment of the Tuesday morning crowd. I don't think there is a more often asked question than "what just came out?'
But I still think the studios are nuts if they think that placing a delay between retail and rental will make a big difference for anything other than the hugest movies. People who rent 2 or 3 movies a week just aren't going to spend the money to own those same titles.

And yes, Transformers is renting like mad. We got more bluray copies of this than any title I've seen before, and they are near impossible to find on the shelf.
But you know what, I haven't seen anyone buy one.

[Dark.Riley]

I, too, think that it will just mean people will wait. I mean look at the way customers act when you try and get them to pre-order a title. They are all for putting $5 down for the hot new blockbuster but as soon as you reiterate that it is to purchase the film and not rent it, they look at you like you have leprosy.

[Antithesys]

a) this means nothing; as others have said, people will just wait.

b) Hollywood's seething hatred against rental giants is currently aimed at Redbox and Netflix. If BBI can find some way to get back in the studios' good graces, maybe they'll get exclusive day-and-date rights. That doesn't sound like something BBI is smart enough to pull off, but stranger things have happened.

[orbitdvd]

What boggles my mind is that Hollywood blames the decline in sales on rentals, not the economy and shitty movies. Consumers WILL find a way to get these movies... probably illegally now.

I knew this would happen once they started butting heads with Redbox.

[deathbydanny]

Given what the music industry has taught us, I actually foresee plenty more movies just being downloaded illegally. Not like they're hard to find, or so some of my customers would like to remind me (say, a lot like teenagers telling everyone they smoke weed!!)

[zooworker]

Hell, most people waited months to see a movie another won;'t matter. And those people usually don't buy New DVD's. So I'll sell a few more but it will still be mostly rentals from your average consumer.

[almondSM]

to me, and most likely to my customers, this doesn't mean anything. It means DVD's will be released at the same rate they are now. If they ask when it's coming out, we give them a date and explain they can purchase the item a few weeks prior if they want.

The only problem is that this opens a huge window for even more DVD burning then there already is. So, one person buys the movie and 10 have a burnt copy of it already. Other than that, i can't foresee a huge problem.

[BUYMECAR]

Given what the music industry has taught us, I actually foresee plenty more movies just being downloaded illegally. Not like they're hard to find, or so some of my customers would like to remind me (say, a lot like teenagers telling everyone they smoke weed!!)

my brother is far from computer competent and he was actually the leading force into getting a job at blockbuster since he frequently visited the nearby store.

just recently, he started downloading movies and he loves it.

"hey bro, i got a great version of Law Abiding Citizen online. it's so easy!!"

[empbal]

Would this stop us from buying retail copies outright and renting them out? Similar to what other chains do with the exclusives that Blockbuster gets?

[Morbid Angel]

Would this stop us from buying retail copies outright and renting them out? Similar to what other chains do with the exclusives that Blockbuster gets?

Of course not. Problem is, there's no way in hell Blockbuster fan afford to send people out to Walmarts and Targets to buy thousands of retail priced DVDs.

[orbitdvd]

Of course not. Problem is, there's no way in hell Blockbuster fan afford to send people out to Walmarts and Targets to buy thousands of retail priced DVDs.

I go out every week to bulk up on titles that I under-ordered. I doubt BBV could do this with the amount of product that they need.

[djblade]

my brother is far from computer competent and he was actually the leading force into getting a job at blockbuster since he frequently visited the nearby store.

just recently, he started downloading movies and he loves it.

"hey bro, i got a great version of Law Abiding Citizen online. it's so easy!!"

Your right! Plus who buys PC games anymore?

Hard times: PC game piracy in US estimated at 75-80%
http://www.gamepro.com/article/news/165488/hard-times-pc-game-piracy-in-us-estimated-at-75-80/
http://www.gamepro.com/article/news/156948/pc-piracy-levels-are-astounding-says-cod4-dev/
^ this will be the future of dvds very soon

[empbal]

Netflix is trying to use this to its advantage:

NOV. 6 | PHYSICAL: Netflix will accept a one-month delay on new releases—an option it is discussing with several major studios—but only if its inventory cost is slashed by as much as half, according to sources.

Also:
Studio sources said Blockbuster has been left out of the window discussion because it orders more product from the studios than Netflix and Redbox and pays a relatively high price for titles.

http://www.videobusiness.com/article/CA6705990.html

[igniteice]

The most important part:

Meanwhile, the company is stocking its kiosks with DVDs it can't otherwise obtain by buying them from retailers.

We used to purchase movies from Blockbuster corporate on a system whereby they would receive some profit of the rentals in exchange for us paying a very small price for the movie and getting tons of copies. Once we went in debt though they wouldn't send us anymore movies. So I would literally just go down to Wal-Mart on Tuesday morning and buy DVDs for our store. It ended up being vastly cheaper and we got full profit from the rentals.

You can't stop people from simply buying their stock from retailers and then renting those copies out.

[orbitdvd]

The most important part:

Meanwhile, the company is stocking its kiosks with DVDs it can't otherwise obtain by buying them from retailers.

We used to purchase movies from Blockbuster corporate on a system whereby they would receive some profit of the rentals in exchange for us paying a very small price for the movie and getting tons of copies. Once we went in debt though they wouldn't send us anymore movies. So I would literally just go down to Wal-Mart on Tuesday morning and buy DVDs for our store. It ended up being vastly cheaper and we got full profit from the rentals.

You can't stop people from simply buying their stock from retailers and then renting those copies out.

Since my employees do all the prepping this is no big deal. However, this would put a burden of labor costs on Redbox and I imagine BBV as well. Redbox is making its millions from pennies, and this would throw their whole system out of whack.

I can't imagine corporate telling managers to go out to Walmart and buy 200 copies of UP.

Now, if the studios do cut our cost of movies in half across the board, I would think seriously about it.

[igniteice]

Yeah, I know it's not realistic -- just saying, there are technically alternatives ;-D

[deathbydanny]

Considering of the three big rental giants, that BBV is specifically the only one that operates as a retail and rental operation as opposed to strictly rental, I see the studios doing far more to accomodate BBV than the others. If this ends up being the case, I'd venture to guess that you're going to see a Netflix and Redbox rate hike pretty soon, especially considering that Redbox has become the barking dog, litigation-wise.

[Ninja]

If they lower the price of the cost to buy a DVD, then it's a possibility that people would purchase more. WB is selling their new movies through BBV for 14.99 DVD and 19.99 BD which are really good prices for first day releases. And because I plan on owning those movies, I'm just going to pick them up on day 1.