Commentary

DVD Rentals Take It On The Chin

by Wayne Friedman , Staff Writer, April 16, 2010

TV networks are feeling better about themselves; so are movie studios, coming off a record-breaking theatrical box-office year. Maybe a few premium video Web sites are high five-ing as well.

But the DVD business? All roads point south.

Most troubling is that this business isn't just seeing lower sales results. All those boxed sets of "Saved by the Bell" and "Family Ties" can only carry you so far. Now, it's DVD rentals sucking wind.

During what is now known currently as "The Great Recession," consumers moved back to the easier and cheaper - DVD habit, that of rentals. Turns out DVD rental revenue climbed 4% in 2009 versus the year before (while sales continued their free-fall, down 13%). That has been a bit of silver lining.

But now in 2010, when, in theory, things are looking slightly better, DVD rental revenue has also turned south, now down in its own double-digit decline funk of 14%.

Why? Much of this news came from the big video retailers like Blockbuster, for example, who are under duress and have been closing stores.

Any positive signs? Sort of. DVD rentals did rise for deep discounters, mail subscription service Netflix, and kiosk operator Redbox.

Don't look now. But in the future, physical rentals (and sales, for that matter) will continue to take it on the chin -- what with the growth of digital sales of films, TV shows, and other content.

Looking for changes at the movie studios? Something's got to give. Executives say DVD sales account for about 50% of the profits for a theatrical movie. New technology in DVD-land isn't even working in this regard. Blu-ray sales haven't helped any.

The DVD business seems to be mimicking those double-digit percent declines the music business has been saddled with for many years. All this says a lot of about the brick-and-mortar retailing of entertainment products in the digital world.

6 comments about "DVD Rentals Take It On The Chin".

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Bob Levy from Rideworks, April 16, 2010 at 2:13 p.m.
No mention anywhere in the article about on-demand movie rentals and their mpact. I'd imagine they are a major reason DVD sales/rentals are down, with piracy (as it has been with the music industry) being another reason.
Reply

Jonathan Mirow from BroadbandVideo, Inc., April 16, 2010 at 2:55 p.m.

I used to go to the video store all the time, but once Comcast started doing OnDemand rentals - I found that they were cheaper, better quality (never any DVDs with food on them) and they never charged a late fee. I was seriously over the late fee thing (as was most of America) and felt I had had my wallet hoovered to the point of no return by BlockBuster. I also used to rent 3 or 4 movies per trip and ofetn ended up only watching one or two - that doesn't happen with OnDemand. Hope ol'BB can survive on all those late fees they charged me for a while...

William Hughes from Arnold Aerospace, April 16, 2010 at 5:48 p.m.

Piracy! No Kidding? Want a Show that isn't officially available on DVD? (For Example the 1960s BATMAN) "Google" the Show, and there will be at least one listing on the first page or two selling it. A WORD OF WARNING! (Besides the fact it's Illegal) I have heard "Horror Stories" from those who purchased these "Bootlegs". Poor-Quality Video and Sound, Missing Episodes, Goods never delivered, etc. I also know of a couple of people who tried to make copies for their friends, and wound up with a nasty Computer Virus!

Jerry Foster from Energraphics, April 19, 2010 at 3:03 a.m.

Piracy in the USA might include sketchy product and service, but, overseas, many people trust pirate DVDs or streams with local dubbing more than the licensed product. The poor people who run stalls don't want customers complaining who might whack them upside the head so the pirates that sell to the stall keepers keep them happy.

Hollywood execs can compete with this if they get real:

1) No advertising: Licensed DVDs almost always waste people's time with unavoidable commercials at the beginning. Pirates never have advertising on their DVDs.

2) Availability: Often within 24 hours after the US premiere, foreigners are watching the latest Hollywood product in the company of their homes in their own language. The cost is usually 30 US cents because 10 films are squeezed onto each DVD to make sure it is bought for $3.

Pirates understand that selling 10 films on one DVD is smart. Hollywood needs to start bundling like that.

Recommended reaction by the industry? Make the latest releases available on DVD or stream at exactly the same time as the premiere in American theaters. This is going to happen regardless, so it is not as if Hollywood has a choice not to follow my advice here.

And did I mention that Hollywood needs to start bundling 10 new comedies on one DVD and 10 new action or horror films on one DVD? Where are the DVDs where "the best 10 films of 2009" are on sale at a discount? The market expects the price of a film to drop steeply as time passes, so great films should be bundled maybe after 6 months sold as single copies.

Much of the value of a film is in its "social currency" aspect - those that see it first have something interesting to "tell others about" which makes them more interesting to friends. In fact, the main reason for piracy is that the people of China, South America and Russia and Poland do not want to be the last to see what the rest of the world would be talking about. People in these regions now often see the latest Hollywood films before most Americans do.

3) Price: Licensed DVDs in foreign countries are about $6 these days. A pirate DVD with 10 films on it will be $3. So the official price is 20 times higher than the pirate price. I recommend that English-language and German and Japanese versions of all Hollywood films be available as DVDs on the day of the premiere for $4 while Chinese, Arabic, Russian and Spanish versions are available for $2.50 - pre-distributed in time for the premiere so as to not give pirates an availability interval to exploit. Online streaming should cost at least 50 cents less per film.

In countries where pirating occurs, the current licensed copy price of $6 retail is far better than the 20 Euro ($30) price which is what people pay in parts of western Europe where consumers are honest and, therefore, willing to be taken to the cleaners by the studios (the studios are only too happy to exploit an atmosphere of consumer honesty).

I will pay $6 for licensed copies, knowing I am getting a relatively good deal because the "honest" stores are trying to compete with the pirate stalls. But $6 for just one film is still too high and very few people will pay this where pirate copies compete. I paid $6 last night because I knew "Dorian Grey" was going to be good and that I wouldn't be funding political opinions as with "Avatar".

There is another issue in that maybe people should be given the option of only paying for a film if they want to continue watching it at the half-way mark. That way they won't be made to pay for ideological junk (like "Thelma and Louise" or "Waiting to Exhale").

4) Quality: Pirates can be very "professional" (especially with the dubbing) and one often hears the meme "pirate copies are better quality" overseas. This isn't so true, of course, because most copied films (so I hear) will feature the outlines of people getting up to buy more popcorn, some coughs now and then + a real laugh track that reflects the reaction of a real audience (I've heard that many consider that a plus).

The dubbing is often word for word translation that wrecks jokes and double entendres.

Obviously, the 3D effect of a film like "Alice in Wonderland" or "Avatar" and much of the color would be lost if a pirate copy was filmed in a theater.

But consumers still may not care if the theater price is 10 times higher than the pirate price and the licensed copy price is 20 times higher than otherwise and if their own language version is not available for viewing in the home fairly soon after the premiere.

Jerry Foster from Energraphics, April 19, 2010 at 3:12 a.m.

Almost forgot: licensed DVDs must, under no circumstance, force a computer user to decide what "region of the world" he or she is in. This infuriates the jet set and everyone else. Microsoft should never have cooperated with this outrageous software scheme and, thankfully, I am seeing less of it with DVDs.

Frank Caruso from RobnCaruso Sales Associates, April 19, 2010 at 1:17 p.m.

As I said previously with the recording industry, there needs to be a scheduled timetable for each commodity. The CD business would not be where it is, if they they had a six month window with downloads. The same with DVD's, you offer a film as a download or for immediate play on demand, you are loosing revenue on hard copy sales and rentals. No wonder Blockbuster and other rental businesses are going under. The immediate greed hurts the longtime revenue and businesses hurt in the long run. The industry only hurts themselves. It's the old saying, "What goes around, comes around." This time it came back, biting themselves in the butt.