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Monday, September 07, 2009

What Percentage of DVDs Are Rented Today Through Vending Machines?

The NY Times covers the dispute between the studios and Redbox today. (Just to recap, the studios worry that dirt-cheap $1 rentals via kiosks will hurt their DVD sales and even could put a crimp on VOD and digital downloads... and so they're trying to withhold DVDs from Redbox until four weeks after their initial DVD release.)

But there's this interesting tidbit in the story about where the DVD rental business stands today:

    Redbox and its vending rivals now have 19 percent of the rental market, compared with 36 percent for rent-by-mail services (Netflix) and 45 percent for traditional stores, according to the NPD Group, a market research company. NPD estimates that vending will grow to a 30 percent share by the end of next year, at the expense of traditional stores.

I didn't realize that vending machines and Netflix now represent the majority of the DVD rental biz....

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  • it's an interesting situation as it appears to be a race to the bottom for all middle men to grab at the last dollars of a once lucrative business.

    I spoke with a content delivery group and the prices for pushing a dvd through the internet into your home is about somewhere around 4 cents! knowing this and knowing that the cost of replication of a disc is now around .18-28 cents depending on volume its only a matter of time before even redbox gets shut down. Netflix on the other hand is preparing to be the middleware for online delivery; however, it may be soon when studios just do without the services of the middle man and are forced to push and market their own product.

    The problem with this is that there is an anchor within the pricing structure that is being set and it is difficult to increase prices once you set that anchor in place. You can always go down and in many cases that is part of the overall strategy but i don't think anyone would have thought that they had to share the revenue of a 100M dollar project by splitting units that cost 1 dollar at the retail end. That's a lot of viewers to break even!


    By Blogger David Geertz, at 8:15 PM  

  • Scott, have you seen this data visualization from Mint?

    Really eye-opening vis-a-vis Redbox.

    /scott johnson

    By Blogger Unknown, at 9:27 PM  

  • As David says, it does seem like content delivery is increasingly a commodity. Perhaps content discovery is the area where quality counts most. This can be read into the $1 million prize for improving Netflix recommendations, and it's also our approach at Jinni ( ).

    By Blogger Phoebe, at 4:12 AM  

  • Considering that RedBox is paying the distributors the fee they set for discs ($15 ea.) - How they rent them after they pay for them is their business...

    Yes, digital delivery is the future but Redbox has convenience on its side which will see it through for awhile.

    I want to see the moviemaker / distributor that does an exclusive deal with RedBox... THAT'S when we'll see the studios quiver.

    By Blogger Cunningham, at 1:00 PM  

  • Very interesting article. I used to rent from the kiosk but found the selection to be very limiting. Now, I usually just buy used movies and/or go to the library. Also, I find many hard core movie fans use NetFlix. Nice post!

    By Blogger Film Gurl, at 12:54 AM  

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