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Shadowing the Underground DVD Economy

7 Jan, 2003 By: Holly J. Wagner

This holiday season taught me a few things about the shadow DVD economy, not the least of which is how much DVD traffic can't be quantified.

Online rental, with Netflix in the lead and a half-dozen other sites following the model, flies pretty much under the radar. We know how many subscribers Netflix has, but not how much they are renting. Since the online rentailers don't report their rental data to anyone outside, we can't tell how much business traditional rentailers are losing to that model, as opposed to sellthrough.

As far as I know, nobody is yet attempting to measure sales of used DVDs (those consumers buy and then sell or trade off to a merchant, as distinguished from “previously viewed” rental copies). That's a brisk business, especially online. In fact, just yesterday a site called skinnyguy.com announced its new barter program, in which the customer sells his or her discs online and uses the credit to buy discs from the site. The site sends the customer the order with instructions on how to use the same box and prepaid shipping label to send back the discs he or she is selling. Wherehouse has operated similarly on its site for some time. I'm sure these merchants know just how much business they are doing this way, but they aren't telling.

Another segment nobody can plumb is what Blockbuster CEO John Antioco calls the video “sharing” economy. Because DVD emerged on sellthrough pricing, consumers started owning it a lot sooner in its technology life cycle than VHS. The next natural step is for neighbors to borrow DVDs along with that cup of sugar or tray of ice they borrow over the fence. Mine do. One copy, several users.

Which, incidentally, leads to another unquantifiable aspect of the industry: Hollywood moguls spent an inordinate amount of time on Capitol Hill last year complaining about how online movie piracy is decimating the industry's profits, citing declining sales. But in an industry that relies, as the cable and broadcast folks put it, on eyeballs, nobody in Hollywood can tell how many people didn't buy or rent a title because they watched their neighbor's copy, as opposed to who didn't buy or rent it because they watched a pirated copy online. Why spend two hours (at best) downloading (plus $3.99 if you want to do it legally) what I can borrow from next door and be watching in five minutes?

Now here comes the next wave in the share economy, one I suspect never took hold on any serious level with VHS: A friend I spoke with after Christmas talked about how nice her family's celebration was. They had a nice dinner and exchanged gifts and then, to round out the evening, everyone labeled the discs they were tired of with Post-Its and they sat around trading. Everyone got “new” movies and extras without shelling out another cent. My brothers used to do the same thing with baseball cards.

I believe DVD has made the pie bigger, as most new entertainment technologies do. But it has also splintered the portions, scattering them to places nobody measures. This means many of the traditional measures no longer apply because they overlook sharing, trade in used copies, online rentals and other subscription rental models that make statistics like turns per copy more or less irrelevant.

And who really knows what else we aren't counting?

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