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Hastings CEO: $1 New Release Movie Rental an ‘Unsustainable’ Business Model

8 Oct, 2009 By: Erik Gruenwedel

Joe Marmaduke, CEO of Hastings Entertainment, thinks rental kiosk operators deserve a place on the home entertainment food chain — but not at the front of the line.

Writing in a blog post on TheWrap.com, Marmaduke said Redbox president Mitch Lowe’s desire to offer consumers new-release DVDs for $1-per-day could produce short-term profits but also result in a catastrophe for the entire film industry, including theatrical.

“We simply cannot give away products that cost hundreds of millions of dollars to produce or else we will end up just like the newspaper industry, which now has an unsustainable business model,” Marmaduke wrote.

Specifically, the CEO argued that marketing $1-per-day new release DVDs could persuade consumers to forgo the theatrical experience with the knowledge that the title would be out on the street in a few months. Consumers would also think twice about renting a title at a brick-and-mortar store or watching it on cable VOD for $4.99, when it could be had for $1.

“If movies are devalued in this way, those who work in the movie industry will be directly harmed,” he wrote. “Reduced industry revenues will mean that fewer movies are produced — directly reducing the number of jobs available to people who work both in front of and behind the cameras.”

Marmaduke is no stranger to budget-priced movie DVD rentals. His Amarillo, Texas-based chain of 154-stores sells movies, music, books and consumer electronics, and has been a pioneer in the offering in-store 99-cent per day movie rentals, in addition to previously viewed movies and music.

Matching rental kiosks’ pricing, however, contributed to Hastings reporting a 12.2% decline in same-store rental comps to $19.8 million for the most rent financial period compared to $21.8 million during the previous-year period.

“Redbox needs to compromise by integrating itself into this established industry model,” Marmaduke wrote.

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