Anne Thompson shares a chart created by online money management site Mint.com on how much, on average is spent per purchase across a number of movie-watching options, from big theater chains to Redbox.
This chart really shows why studios are so afraid of Redbox: The numbers there are growing from 2008 to 2009 while the numbers at theaters and Blockbuster Video and other rental outlets are shrinking. The the dollars spent per purchase at Redbox aren’t nearly what they are elsewhere and so represent a clear and present danger to studio revenue.
(Anne also has a guest post from Diane Garrett that goes into the studio’s oppostion
I get why studios have been so aggressive against Redbox. I do. It makes sense to me. I’m not saying I agree with them, but I get it and this chart makes it very clear what has them spooked. But the reality is that distribution is changing and the market is defined by what the consumer perceives the product to be worth and not only by what the producer wants it to be worth. Long before Redbox or Netflix there were “dollar theaters” – second run houses where films would go after their initial theatrical run where they’d play for a few more weeks at a cheaper ticket price – and people would make the decision whether a movie was worth paying $5 for at the first run theater or $1 for a couple months later. So it’s not a new mindset we’re dealing with. Just different distribution.
That point – about consumer perception of a movie’s “worth” is picked out by Chris Albrecht at NewTeeVee in a post pointing to a Video Business article about the aggressive pricing for online distribution adopted by iTunes and Amazon. The first factor in that is likely those two outlets using their powerful status to make a play for market share. But there’s also the idea, he says, among consumers that online movies *should* cost less. That’s true both in theory and reality. Digital distribution comes without the production of physical media and the packaging it needs and the lack of those expenses should absolutely be reflected in the price, regardless of what Walmart might want.
Product is worth what the market will bear. The problem with disruptive models like those Redbox adopted is that it not only threatens the establishment but also drastically changes the thinking of the consumer-focused public in a way that can’t be done. Lawsuits will fly and settlements reached, but the reality is that people are now used to the “free” rentals they get from Netflix (a monthly charge, but no direct cost per movie so it’s seen to some extent as “free”) and the $1 idea introduced by Redbox. Eventually there will need to be thinking devoted to how to adapt to these models and stop railing against them.