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Studios, Rentailers: Reluctant Partners

17 Jun, 2010 By: Stephanie Prange

It’s always been a marriage of convenience between studios and rentailers, with one or the other holding more power from time to time.

Occasionally, the relationship has been rocky, even resulting in lawsuits, notably between the indies and Blockbuster Inc. and the studios at the beginning of the decade and the recent Redbox litigation. Still, rental of physical media has survived for about three decades and shows signs of change
(kiosks, subscriptions), but not extinction.

The Holy Grail of digital delivery was supposed to make physical rental a relic, but instead the rentail of discs has remained quite viable, with Redbox and Netflix profiting while the store model, at least for national chains, has taken a big hit.

While Netflix garners most of its Wall Street plaudits from its emerging streaming business, the subscription service doesn’t plan to ditch physical rental anytime soon. In fact, Netflix has noted that the Blu-ray rental premium is adding to the bottom line.  That premium ranges from $2 extra a month for the one-out plan to $9 extra for the eight-DVDs-out-at-a-time plan.

Redbox is the red-hot newcomer in the business — and it’s about as old-fashioned as a coke machine, dispensing physical discs from a kiosk. No newfangled digital delivery there.

Recently, Disney and Paramount studios have both expressed confidence in the old physical rental model being updated by Redbox kiosks by continuing to offer new releases to the company on street date. The studios’ execs say they are following the will of the consumer — and that may be true. Consumers are looking for convenience and value, both of which kiosks offer.

But what is often lost in the conversation among industry pundits is that physical rental is surviving, even in light of competition from digital streaming and downloads. Many of the troubles plaguing the national chains are based on financial shenanigans and ill-conceived buyouts. I’ve heard from many indies who are making their way despite the competition.

Physical media rental is alive and well, at the right price. It’s familiar, it’s easy and consumers like it. With all the talk about Hulu and Epix and Netflix streaming, it’s easy to lose site of the fact that many consumers like to rent a disc for a night or two and return it.

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