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The Best of Both Worlds: DVD Rentals and Sales Can Coexist

15 Apr, 2004 By: Thomas K. Arnold

I remember years ago, shortly before DVD came to market, I sat down with Warren Lieberfarb, then president of Warner Home Video and the format's chief architect, for a rather heated one-on-one.

I had been writing a series of columns in which I expressed the opinion that DVD would and should become available for rental as well as sale, because some consumers would rather rent than own and even those likely to buy would probably want to try it first.

Warren gave me one of his famous stare-downs and challenged my wisdom as only he can do. He politely informed me that the whole concept behind DVD was to generate incremental revenue for Hollywood, and if rental became significant, we were in danger of merely having DVD become a replacement technology for VHS.

In retrospect, we were both right. DVD has become a hot sellthrough commodity generating huge wads of incremental dough for the studios — money they never would have had if DVD hadn't come along. Just yesterday I spoke with the head of a small independent supplier that specializes in obscure arthouse and performing arts videos. He was jubilant — his company had just taken its first significant order from Wal-Mart. Whereas in the VHS era a high-profile theatrical was lucky to sell 500,000 units, now the same-caliber of film can easily move 3 million units — more than enough to compensate for the price differential between a sellthrough-priced DVD and a rental cassette, particularly after studio-direct revenue-sharing came into being.

And yet I'm not quite the idiot Warren made me out to be, either. Instead of 25 percent of the movie-consuming populace buying movies and the other 75 percent renting movies through pay-per-view, as Warren had predicted, we're seeing a viable rental market coexist with a booming sales market. The rental market hasn't tanked, as many had predicted; despite the death of rental pricing — and those six-month rental windows — the rental business is still with us. Sure, consumers can buy virtually any hot movie for less than $15 the first week it comes out, but many still prefer to rent for a couple of bucks — and they prefer to rent something physical that they can handle and touch and slip into their machines whenever they wish, even though the mechanism may be electronic (Netflix).

What we've gotten, with DVD, truly is the best of both worlds — two worlds that eight years ago, when I was sitting across a table from a steely-eyed Warren Lieberfarb, neither of us would have thought could ever thrive in the same universe.

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