Movies for a Buck: Good for Consumers, Bad for Hollywood?

Redbox Rental Kiosk

Redbox Rental Kiosk

Hollywood is up in arms. Kiosk chain Redbox is threatening DVD sales by offering movie rentals for $1. Even though Redbox’s affordable price structure and convenient locations may help spur DVD sales, studios are still not buying it.

The issue is not the $1 price tag; it’s the availability of new movie releases on DVD. Traditional retail chains and video-on-demand services charge about $5 for a new release rental. Redbox charges $1. Studios feel that this price point waters down their brand, and are fighting Redbox and other like services to have them wait 28 days after they arrive in retail stores, before the kiosks can rent new releases.

Hollywood has a point. Or does it? What would happen if consumers were able to buy $900 Louis Vuitton bags for only $100? Louis Vuitton would probably sell a heck more bags. Ultimately the brand’s cache would suffer in the end and Louis Vuitton would become just another ordinary goods manufacturer.

Consumers don’t care about brand value when it comes to renting movies. They want convenience and affordability. While content is still king, it also has been commoditized. The Internet and sites like You Tube and Hulu have made countless videos and movies available free for online viewing.

Some of the spin reported in the media talks about how these movie rental kiosks will hurt the mom and pop retailers. Are there any left? Didn’t big movie rental chains like Blockbuster in the 1980s squeeze out all the independent stores? (Blockbuster by the way is rolling out its own movie rental kiosks).

People don’t want to buy movies anymore. The recession and a myriad of other reasons have caused a drop in DVD sales. Rentals on the other hand are up according to some trade groups with kiosk distribution expected to swell. In spite of the Hollywood backlash, some studios like Sony and Paramount already have signed deals with Redbox.

Hollywood has a tough job ahead. It knows it needs innovative sales models like Redbox to distribute its movies. It must however find better ways to protect its content and adapt to the new entertainment landscape.

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