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It’s been stated repeatedly here and in many other places: consumers have (probably permanently) shifted away from an “own” mindset to a “rent” one when it comes to home entertainment.
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The second quarter results for the sales of physical media underline this shift: sales of packaged goods such as DVDs dropped 16.3%. At the same time, DVD-by-mail and streaming video-on-demand grew more than 24%, while kiosk rentals were up nearly 37%.

So, despite being about the only bright spots in the Hollywood firmament these days, Redbox and Netflix find themselves increasingly treated like unwanted stepchildren. 28-day delays on hot new release titles have been placed upon both companies, and Netflix has been subjected to vastly increased costs in order to obtain streaming content.

Netflix streaming, which even recently had been cavalierly dismissed by Hollywood honchos, has simply gotten to big to be ignored. Hollywood has responded by turning the screws on Netflix when it comes to content deals, cutting into the company’s margins.

It has been speculated that higher content acquisition costs are one of the primary drivers behind the much-discussed upcoming Netflix price increase. While Redbox will likely see at least a temporary boost from defecting Netflix customers, the kiosk operator has been on the outs with most of Hollywood for several years now. Hollywood sees Redbox’s cheap rentals and Netflix’s “all you can eat” streaming and by-mail models as devaluing to its content.

The irony in all of this is that while Hollywood has done its best to ignore/stifle Netflix and Redbox during the last few years, these two companies represent the best hope the studios have for growth in the movie rental market. By all accounts, premium VOD, artificially propping up Blockbuster and other clumsy efforts by the studios to boost rental revenues under their own terms have failed. Whether the studios like it or not, when the average consumer chooses to rent a movie, they most likely turn to Redbox or Netflix.

Are the studios shooting themselves in the foot by trying to wring the highest possible content deals from Netflix and forcing both companies to wait for many new release titles?
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Would a policy designed around embracing Redbox and Netflix pay higher dividends?

(Industry figures courtesy of GigaOM)

7 Responses to “(R)editorial: Do Redbox and Netflix Deserve Better Treatment from Hollywood?”

  1. Visitor [Join Now]
    DanoFive0 [visitor]

    I am useing Block Buster now. Got the two out at a time. Then take them back to the Block Buster Store. Get two free ones. Then start all over the next week. $14.99 a month + Tax. Not bad. So far so good. NetFlix was my fix for years. No more. And RedBox. I was going to all the time. But no more.
    And I buy Good DVDs when I can. The thing is. More and more movies are getting to be Trash. Just liuke 95% of what is on TV is Trash..

  2. Member [Join Now]

    Since these ideas, if not these companies, are going to be around for awhile, the studios need to figure out how to use these to their advantage.

  3. Visitor [Join Now]
    Westieman1 [visitor]

    Bewkes oversees Time Inc., HBO, Turner Broadcasting (CNN, TNT, TBS, Cartoon Network), Warner Bros. and New Line Cinema (according to Wikipedia) and maybe some others as well. His job is to drive up ROI for stockholders so he does not care about the average consumer like you and me. Maybe he sees this as a way to “devalue” Netflix and Redbox or drive them under and increase market share for the companies he runs. Just think: if he drives them under, his conglomerate might then be the only game in town and he can even increase VOD charges for cable providers in addition to acquiring Redbox and tripling prices so we can rent DVDs on his expensive terms.

    On December 6, 2010, “Inside Redbox” quoted Bewkes as saying: “It doesn’t make sense for our networks to license shows to a subscription service that isn’t paying close to the value of those programs . . . Simply put, large aggregation and low price is not a particularly useful thing for consumers or content creation.”

    Seriously??? Reasonably priced rentals are “…NOT A PARTICULARLY USEFUL THING FOR CONSUMERS…?” The traditional CEO always tries to spin a decision as being in the best interests of consumers (kinda like politicians telling us what they do is in the best interest of increasing U.S. jobs, huh?). I guess his Stanford MBA taught him to screw the consumer and be sure to take care of Wall Street and his stockholders (NOT consumers).

    His efforts won’t drive me away from Redbox even if I must wait a month for newer releases. With regard to Netflix, however, their price increases were coerced and I must drop my membership, especially with the new fall TV season starting shortly. I cannot justify paying even $8 per month for DVDs by mail (I currently receive streaming and DVDs by mail for $11 per month, soon to be $16). I would have to rent more than 8 DVDs per month from Netflix to exceed the $1 rental value from Redbox or Blockbuster Express. And, as I said, the fall TV season is beginning and I expect that will be watching some good stuff (some is poor but so are some movies) and supplementing that with an occasional DVD rental (but not 8+ per month).

    Stick to your guns, Redbox and Blockbuster Express! It will pay off in bigger dividends soon enough!

  4. Member [Join Now]
    ChadCronin [chadcronin]

    There is not anywhere left to rent movies. Both Blockbuster and Family Video have practices in place that censor movies and/or prevent me from seeing titles/content I want to see so I don’t go to them anymore. Netflix and Redbox have done several things right but have gotten worse lately due to the studios messing with them. I am not mad @ them though because they have always tried to provide content @ a reasonable price. The studios working against them is working against use and it’s like they are mad that we finally are seeing it and refuse to pay high prices anymore. Instead of them demanding the vendors do exactly what they want now, they should be having discussions on long-term deals. If the studios want me to buy, they need to keep the prices lower and stop with the non-skippable trailers.

  5. Member [Join Now]
    JoeZilch [joezilch]

    One thing that Hollywood doesn’t seem to understand is the value of an impulse sale. When somebody returns a movie to RedBox they often find themselves looking for something else to rent. I’ve witnessed it every time I’m at a RedBox.

    Personally I have watched some of the worst movies put out in the last few years thanks to RedBox and Netflix. Movies I would NEVER pay to see because I know, based on previews alone, that they’ll be garbage. I’m not going to pay $3-5 per garbage flick simply because I don’t NEED to see it. I’m willing to drop a buck (or a percentage of my monthly netflix fees due to mail delays) to watching films I know weren’t worth seeing in the theaters.

    This is the problem with DVD sales as well. The studios see me rent “Season of the Witch” from RedBox and watch “Black Death” on Netflix (I wanted to compare the two out of boredom). The studios then think “Oh My! We just lost 2 DVD sales” for movies there was no chance I’d buy blind. Having Streamed “Black Death” I might buy it. That’s a + in the sale side, not a -. They don’t see this.

    • Visitor [Join Now]
      barb [visitor]

      You make a good point. I have also rented really bad movies from Redbox since they r free or only a dollar such as Red Riding Hood and The Eagle. I would NEVER buy these or seen them in the theater. I wish Redbox had HBO and Showtime shows though and I used Netflix for my Entourage fix.

  6. Visitor [Join Now]
    Homesteaders [visitor]

    Great story! I really thank you for making the effort to share this. Thanks!