The Great Divide

16 Jan, 2014 By: Thomas K. Arnold

The divide over giving the rental market access to new DVDs and Blu-ray Discs is becoming more and more perplexing, as the six major studios appear to be agreeing on so many other things these days — most significantly, giving digital downloads of movies a two-week window to encourage consumers to buy product electronically.

The packaged-media business remains healthy, but given their druthers studios would much rather sell their content over the Internet than continue to incur the huge costs and logistical challenges of manufacturing discs, shipping them out to retailers and then dealing with the headaches of returns, inventory replenishment and the like — challenges that simply don’t exist in the electronic world.

Of course, studios don’t want to do anything to damage the consumer purchase model, which is where they generate the bulk of their revenue — and their profits. That’s why the same studios that are pushing electronic sellthrough (EST) — which I guess I should start referring to by its fancy new name, Digital HD — are also propping up the packaged-media disc business as much as they can, mostly by continuing to provide consumers with the best-possible viewing experience in a neat, tidy, eye-appealing little package that fits neatly in bookcases and generally comes with gobs of cool extra content.

That’s why it baffles me that some studios are still not holding off on issuing newly released movies to rental outlets, particularly Redbox. The prospect of cannibalization appears clear as day — if you can rent a movie for a buck from a vending machine right outside Walmart, why venture inside and buy the same movie for $15 or $20, particularly if it’s a new release you simply want to watch once and not necessarily own?

The three studios that do withhold movies from key rental vendors for 28 days — 20th Century Fox, Universal Studios and Warner Bros. — all swear by their decision. And the rental folks don’t appear to be as put off by the delay as one might think. Heck, Identity Thief even ended up being Redbox’s No. 1 rental title of 2013, and coming from Universal it was subject to a 28-day delay.

As for the studios that give everyone equal access to new releases, they say holding back movies from one class of trade only deprives consumers of choice – and doing that is never a good thing. Of course, those studio are also handsomely rewarded for this.

Who’s right? I tend to side with the holdback crowd, but I’m just a journalist, not a marketing whiz. I guess we’ll just have to wait and see, just as we did during previous divides, like Blu-ray Disc versus HD DVD and, going back a little further, Betamax versus VHS.

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About the Author: Thomas K. Arnold