It looks like Hollywood is in a twist over $1 movie rentals from popular kiosks like that run by Redbox. The cheap rentals are “costing” Hollywood a billion dollars, at least according to some analysts.
I doubt it. Fact is, most of those purchasing the rental would never go out and buy the movie in the first place. I’m pretty sure Redbox probably winds up a net positive for studios for the time being. Claims to the contrary seem a bit foolish. You know, like they’re coming from advisers who got the predictions wrong.
The deeper question here is about media markets, and the inherent value of the service Hollywood is providing. I’m not alone in thinking that the Hollywood studio system is pumping out a lot of worthless crap these days. Apparently $1 rentals are very, very popular. That could mean one of several things: first, that DVDs (even at their currently discounted rates) are still too expensive to purchase, and second that $1 is probably too low a price (but it is a convenient marketing pitch).
The value of a DVD has diminished over the last few years for a few reasons: the most notable being the final victory of high definition over standard definition. DVD video quality isn’t quite up to snuff, and so the value of those discs has diminished. The other problem is convenience. As online systems like Netflix increase in popularity (and deliver in HD even over mediocre Internet connections), the DVD value drops even more. Even at $10 per month, the Netflix system is a value for those who watch enough movies and value the convenience of instant, last minute viewing choice.
So, what are Hollywood movies valued at by consumers? Not a lot. At least not at the moment. There are no real viable online solutions at the moment. Netflix’s library is small at the moment, and there’s a lack of competition at the moment. We won’t know for several years what the final pricing solution will be.
One thing is clear, though: Hollywood placed a huge number of bets on continued DVD sales that simply aren’t materializing. Blu-ray remains underwhelming in its adoption rates (though it is doing better now that hardware prices have come down). Hollywood greenlit some movies based on potential DVD sales, but now that money has dried up. That means smaller movie budgets in the short term. Once again, Hollywood made a sucker bet. It’s been clear the last few years that physical media for movies was going to follow physical media for music, and Hollywood didn’t adequately prepare. Who exactly is working over there these days? Don’t any of them keep up with the technology?