DVD versus Download – Movie Rentals

Ok, someone needs to explain this to me. It makes no sense how expensive digital movie rentals are. It truly boggles my mind. I have a number of ways to rent them, and they are all expensive, a quick sampling of ‘recent releases’ gives:

iTunes: $2.99 – $3.99
Xbox Live: $4.00 – $5.00
Comcast onDemand: $4.99 – $5.99

Given that on all those you are just downloading and/or streaming it, there is no physical medium, etc. Why is it so expensive?

Especially when I can go to a Redbox machine at any number of stores near me locally, and pay $1 to get a physical DVD rental.

That’s right, all these other companies are charging $3 to $6 to rent a movie electronically, but Redbox someone manages to do it for $1, while handling physical disks, having to replace them as they wear out, sending people out to restock with new movies, pay for and maintain a rather complicated machine, and give kickbacks to the store they sit in.

Something is very wrong with this picture. By comparison alone, electronic rentals should be at MOST $0.99, and possibly a fair bit less.  Is there some part of the big picture I’m missing here?  I’d love to know.

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3 Responses to DVD versus Download – Movie Rentals

  1. wormus says:

    I would venture to say that there is more profit in physical DVD rentals. Once the royalties are paid and the physical media is covered it’s pure profit (for the life of the DVD). Downloads have the same royalties but the bandwidth will be a cost and maintenance of the server farm will be a cost that won’t go away.

    Video stores traditionally trade in DVDs as well as sell second hand DVDs to lower costs. The rentals are also subsidized by popcorn sales, and the gumball machine in the corner.

    With Redbox you very rarely only pay the $1 since your card is billed at 12:01 am if you keep it overnight you’re going to pay $2. They also don’t have to maintain properties, pay for securities etc. I bet their profit margins are higher than netflix.

  2. Eli says:

    Aaron, but doesn’t that make ZERO sense?

    First of all with Redbox no matter when you get the movie, you have it until 9pm the next day for your $1, I’ve done a number of them and never charged more than $1 … even if you did, you’d have to have it 5 days or so to outweigh the cost of digital.

    And sure, I understand the point of ‘DVD is royalty once’, but that’s essentially my point. It makes no sense. If Redbox’s model can give you $1 rentals, (And let’s not forget Netflix which can give you extremely cheap if you watch alot with on-demand) … Then it seems crazy that the licensing agreements don’t allow for cheaper rentals digitally.

    Until they do, I’ll still be hitting the Redbox machine, or watching stuff on Netflix.

  3. wormus says:

    I don’t think the “Redbox” in my local Publix is a “Redbox” or some Floridian variant, but the only way to pay once is to get it back before 12:01.

    I have only used the blockbuster version of on-demand pay-per-download, and I really liked it. If I want to watch a movie I have a couple options.

    1. Add it to my Netflix Queue
    2. Drive to my “Redbox” pay $1 and then drive it back the next day
    3. Pay $3.99 and watch it NOW.

    So I justify the extra cost with the convenience of not having to drive the 4 blocks to my nearest “redbox” twice. Of course it’s very likely that the movie isn’t in the Redbox, and I’ll have to drive the 4 miles to my nearest blockbuster and then pay whatever that costs.

    Regardless of what costs more on the backend – they are charging for the convenience.

    Next lets talk about why my neighbors cable bill is $250+ a month 😉 THAT is highway robbery!

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