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Trading It for Themselves

6 Jul, 2004 By: Holly J. Wagner

A small but growing segment of consumers and entrepreneurs are launching Web sites and online groups that facilitate trading discs with little or no charge, a development that could affect any retailer selling or renting new or used DVDs.

These sites are similar to file-trading sites, but they're legal because users trade physical media without duplicating content.

New sites like Peerflix.com, launched March 1 and approaching the end of its Beta test, previewedDVD.com and ReSpinIt.com are cropping up to let users list the DVDs they have to trade and discs they want, and trade with other owners. In most cases it's not only legal, it's almost free. So far, only one of the services is gunning to replace rental.

Trading to Replace Rental?
“It's intended to replace rentals and pay-per-view and pay cable channels,” said Peerflix.com operator Dan Robinson. “We find on average, any one user has five DVDs in their house that they have not watched yet. It's way more spontaneous than any Blockbuster could ever be.”

Blockbuster CFO Larry Zine acknowledged the shift in consumer preferences at an investor roadshow June 14. “All trading really is, is extended rental, and you will be able to decide how long you want to own a movie,” he said.

On Peerflix.com, users create lists of movies they want and have. Peerflix sends Netflix-style envelopes to its members. When a user requests a title, the owner prints an address form, pops the disc into the envelope and sends it. The sender's account gets “peerbux” awarded under a proprietary point system and can use them to trade with other users. Robinson plans to expand the service so that Peerflix requests titles that are not requested after a specific time period — perhaps as little as a day — and users send them to a distribution center in exchange for “peerbux.”

Peerflix gives users the option of paying a $5 monthly fee or $1 pertrade, but Robinson plans to drop the monthly charge option.

“If you want to gain more trading power on the network, you could go to Blockbuster and buy previewed movies to trade,” he said.

That, Robinson said, will be part of the service's advantage over free sites that merely bring traders together. That, and the site's guarantee: If a user gets a damaged disc, he will “get credited for [spent] Peerbux and, if you choose the same title, you get moved to the top of the [request] list,” he said.

Collectors Like the Box
One drawback is that users can't send the case and liner notes cost-effectively. The envelope and disc put the weight right at the 37-cent limit, Robinson said.

That could discourage collectors, said Ron Epstein, moderator of the Home Theater Forum (the online forum also has a bustling trading area on it).

“There's always somebody that something like this will appeal to. But I'm a collector, and I don't see this appealing to hard-core collectors,” he said. “The school I come from is, you have a film and if you want to trade it, you want something of equal or greater value. You want the packaging. I think a title loses its value considerably when you are trading just the disc without the packaging.”

But Robinson doesn't think it will influence people who just want to watch the movie.

“What I wanted personally in my house was a VOD box, but I already had a lot of content, and I figured maybe the best way to get VOD was to get content from my friends,” Robinson said. But ripping copies isn't legal. “What is legal is sending your movie in the mail, so that's what I decided to do.”

Blockbuster is far from the only company eager to capitalize on the trading trend, and so far, the chain's plans to wade deeper into consumer trades are built around offering store credit. Chains that offer store credit tend to pay a fraction of the SRP for used discs — typically about 25 percent. Some dealers pay much less.

Getting More for Your DVD
That's what prompted Lon Lorenzo and his friends, including assistant administrator Brandon Seidel, to launch ReSpinIt.com. “We had a bunch of DVDs that we wanted to get rid of, and they were not going to pay enough,” Seidel said.

ReSpinIt, which charges no fees, has about 400 traders. “In the beginning, it was just tech people, a bunch of people we knew,” Seidel said. “Now it's their grandmothers, too.”

Ray Ragan and his brother, Chad Calhoun, had the same problem so they started CDGoRound.com.

“We were looking to get a little more value out of our CDs, and after about six months opened it up to other media,” Ragan said.“I think the majority of our users are people who are really interested in their media and have excess,” he said. “They are just looking to get a little more value out of it. They may be buying knowing that they can trade a disc. Also there are movies they did not like as well as they expected.”

For those who scoff at the idea that a Web site created to serve the creator's own need can be a going concern, consider Netflix, which CEO Reed Hastings started because traditional rentals didn't fit his schedule or needs.

Ted Sarandos, VP of content acquisition for Netflix, is skeptical about how much demand there will be for trading services.

“We did some focus group testing on that model a couple of years ago, and it did not do very well,” he said. “It's the [questionable] reliability, dependability of the product that turns people off.”

But, he conceded, “If it enhances people's love of movies, it's great for everybody.”

Peerflix' Robinson, who founded and started the proprietary Internet service provider Spinway (the system underlying Bluelight.com, among others), believes the demand will be great. With no marketing, Peerflix has gained 500 active users since its March launch in Beta.

“There is massive inventory of DVDs building up in people's houses,” he said. The same holds true for video games, which he plans to add to Peerflix as he begins building an online community.

Although previewedDVD.com appears to be active with traders, site operators did not respond to requests to discuss it. Neither did operators of DVDJones.com, which rather than trading, lets users list their DVDs and to whom they've been lent, so folks who share a lot can track their libraries. Whatever the choice, the site operators are betting on filling a need.

“It's better for you to go to the store and buy that DVD, watch it and trade it on Peerflix. Then you are going to get more movies for your money,” Robinson said. “It's cheaper than any other form of home entertainment.”

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