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Building From Past Profits

5 Feb, 2015 By: Thomas K. Arnold

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Talk about the end of an era. I woke up this morning with a press release in my inbox telling me Rentrak has sold its Pay-Per-Transaction business to Vobile, a “worldwide leader in video and audio content protection, measurement and monetization services,” for $7 million.

Remember PPT, folks? That was the founding premise behind Rentrak back in the mid-1980s when a video retailer named Ron Berger founded the outfit, now a major media measurement and research company.

At the time, Berger ran a video chain called National Video, a major player facing stiff competition from Blockbuster and its policy of stocking up big on the hits. Berger devised Rentrak as a way for smaller retailers to even the score: they could lease titles rather than buy them outright and thus go a lot deeper on the major new releases than they otherwise could afford to.

Rentrak’s formula later was the model for studio “copy-depth” programs, which allowed retailers to buy more copies of hot new titles on the cheap in return for sharing a percentage of their rental revenues with the studios.

Revenue-sharing, as it’s now known, remained the studios’ preferred way of dealing with rental retailers through the DVD era right up to the rise of Redbox and Netflix.

Rentrak, meanwhile, used the profits from PPT to build its movie and TV measurement businesses, which have ensured the firm’s viability.

Using profits from the old to build the new is a smart business strategy, and one that’s kept industry – all industry – alive over the years. When IBM was faced with an onslaught of PC clones, the company’s fortunes suffered – remember that $8 billion loss in 1993? – until the firm wisely shifted course and began focusing on IT services and enterprise server solutions. Western Union survived email and texting by shifting from telegrams to money transfer services.

Here in Hollywood, we have a slightly different cycle. The core product – movies and TV shows – has long been the same. But the funding mechanism continues to change. First, it was theaters; then, syndication and TV rights. Home video became a potent funding force only after sellthrough triumphed over rental. And now the very same streaming services that threaten the viability of packaged media sellthrough are becoming a key movie and TV show funding source, thanks to the huge bucks Netflix and Amazon are willing to pay for original content as they aggressively expand beyond the United States.

Ah, the cycle of business. As one writer, for the website, recently wrote, “A successful company is like a great white shark. In its prime, it chews up the competition, but if it dares to sit still for too long, it dies.”

Rentrak is a great example of this. As for the studios, it’s still too early to tell.

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