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Rental’s fortunes swing
June 22, 2007
What a difference a week makes in the respect accorded the rental business. Two weeks ago, Time Warner execs dissed rental as an inefficient distribution model and less profitable for studios than VOD.
Then last week—just seven short days later—rental was looking as important as it was 10 years ago.
What happened? Blockbuster announced it would expand Blu-ray Discs only in 1,450 new stores, while leaving HD DVD in just 250 stores where both formats have been tested since last fall.
That prompted Sony home entertainment chief David Bishop to predict “this is really the beginning of the end” of the format war and, by extension, HD DVD. Fox chief Mike Dunn called the Blockbuster move “a true development” and “a big, big milestone.”
Self-serving? Of course. These guys have been calling the format war over since CES in January. But their comments suggest that rental stores are an important vehicle in launching a high-tech and expensive new format.
How true that is depends on how you measure importance. From a strict sales standpoint, Blockbuster will carry 170 BD titles an average of a couple of units deep in 1,700 stores. That could amount to a half-million units or so sold into Blockbuster by the BD studios. Nothing to sneeze at at this fledgling point in the format’s development, but certainly not enough to run the other guys out of business.
In addition, analysts suggest that people affluent enough to have already jumped into high-def players tend to buy not rent, raising a question about how the BD titles will turn in stores.
But from a consumer marketing standpoint, the deal carries much more significance.
Blu-ray will have a relatively large presence in those 1,450 stores, with no presence at all for HD DVD, suggesting to consumers—especially those in the “early majority” most likely to buy players during the fourth quarter—that one format has, as the studio heads suggest, already won the war.
The Warner comments on rental vs. VOD and the BD studios’ stance on the importance of the country’s largest rental chain in speeding consumer acceptance of BD are separate and unrelated.
But taken together, they do create an interesting and, I would say, fairly accurate picture of the rental market today.
As a distribution model, it may be inefficient, and there certainly are more profitable distribution channels for studios today.
But as far as reaching consumers, it is still large and powerful, generating $8 billion a year in consumer spending. For many consumers, it is part of the fabric of their lives, and seeing a product “endorsed” there, even implicitly, may carry more weight even than seeing it on the shelves at Wal-Mart.
Posted by Marcy Magiera on June 22, 2007 | Comments (2)
