Movie studios think cheap DVD rentals are a major factor in DVD sales that have been on the decline for some time. And now one of those studios, Warner Bros., may have the ability to prove the theory right or wrong.
That's because rental giant Netflix has inked a deal with Warner Bros. under which Netflix won't rent new Warner Bros. releases until they've been on sale for 28 days.
The deal doesn't come as a surprise. Netflix has been in negotiations with the major studios about such a deal, as we've detailed before.
The deal makes a lot of sense for Netflix as much of its business is attributed to catalog titles. In fact, new releases only account for 30% of Netflix shipments. But even so, the deal is important since it may help answer a simple question: just how much are cheap rentals hurting DVD sales?
If, a year after the deal goes into effect, DVD sales are still declining and there's no sign that a 28-day delay at one of the largest low-cost rental services is stemming the tide, studio execs will need to reconsider their assumptions about why people are buying -- and not buying -- their DVDs.
As I've stated before, it's all about value. While it's possible that studio execs will be proven right, the most likely source of the DVD sales slump is the fact that many consumers just don't see as much value in purchasing DVDs as they may have in the past. If that's the case, studios will need to be far more creative than keeping consumers from renting their content for a month.
Photo credit: DeclanTM via Flickr.
Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.
11:03AM on 7th January 2010
Are the big studios considering they are churning out shite and noone wants to buy their movies?
Do I want to keep a film that I buy for £12 only to really watch it once when I get it, and then maybe a few years later. Do I really want to buy my films to watch them over and over again?
I recently started DVD Rental and to be honest, is the best thing I have ever done. Both for reducing the size of my collection, to seeing far more films (in a month) than I ever have done and all for the cost of one full price DVD a month. Result!
Long live DVD Rental services
12:13PM on 8th January 2010
Be interesting to hear the results of this. As more and more people perceive greater value in renting more films for the same price as having one sitting neatly on their shelf, it will change the dynamics of the industry. The industry is heading for greater polarisation between the big mega budget film releases with the marketing budgets to match, where money is made in all the franchise rights and the independent sector. Its the independent sector that will be hit hardest by this. When a producer can no longer rely on making their profit in DVD sales, where's the incentive in taking the risk of making a film that will reach a smaller audience? The niche market will still work as they will be able to make their return, but its the $10 to $20m market that will take the hit.
3:16PM on 8th June 2010
Netflix do hurt dvd sales. I help run a small dvd company and they only buy 30 copies of any films for the entire USA. When netflix stop buying from us, sales have went up by 32%. BTW, they only pay $7 a disc.