Consumers may not realize it, but a battle is going on between the distribution giants of DVDs. Many people are going online to request movies online from www.netflix.com, only to find that it’s taking an abnormally long time for their movies to arrive — 30 days, to be exact. Motion picture companies have decided to further penalize customers for not going to theaters to see new releases. Once the movie is said to come out, people will only be able to buy them in stores or online for the first 30-45 days. After that, they can scoop up the films at places like Blockbuster, Netflix and the Redbox kiosks.
Late last year, Universal Pictures ordered its distributors not to sell its DVDs to Redbox until the new movies had been on sale for 45 days. Fox and Time Warner also decided that their top movies should be out for at least 30 days before being available for $1 through the Redbox kiosks. This decision is being contested in court by Redbox and Netflix, who are also being affected by these new regulations. According to Time Warner CEO Jeff Bewkes, the $1 rentals should be treated like the “cheap show” movie theaters with an appropriate window of time for the entertainment industry to make the big bucks off consumers. Yet, Mitch Lowe from Redbox argues that they can afford to pay the studios more because they’ve “significantly reduced the cost of delivering movies to consumers” and they garner more repeat business. Motion picture giants are primarily worried that the undercutting of prices is what will jeopardize their whole business model.
Blockbuster, meanwhile, is crying the blues about their $1.02 billion profit this quarter. Their sales of DVDs are down 22% and their shares have declined 16%, they complain. Part of this, they say, is due to their reduced inventory as they try to gain access to more cash. “We were also facing new and very aggressive competition that are better capitalized and would likely take share from us as we pulled back,” whines CEO Jim Keyes. The landscape is complex and challenging, given the current recession, Keyes added. Yet, competitors are seeing giant leaps in profitability by meeting consumer demands, despite distributor moves to block their access to new movies. Redbox revenue grew 110% last quarter and Netflix saw modest revenue gains of 20%.
There may be other ways to work with a “window” of opportunity for DVDs. Sony, for instance, is working on a pay-per-view movie service called “Bravia TV,” which would allow consumers to get movies instantly beamed to their television set just after theater releases but before rental releases. While consumer demand is encouraging more films to be delivered in a quick, convenient method, there are several problems with this business model. For one, not all TV sets are equipped with the technology to handle this new ordering method. Secondly, how many Americans are willing to spend $40 to see a movie, when they could just wait another month and spend $5 to rent it or buy it immediately for $20?
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