Hollywood claims that it is losing one billion dollars a year because of one dollar rentals of DVDs from Redbox kiosks, according to the Hollywood Reporter.
The report goes on to state that losses will get even greater due to a “ripple effect.”
A study by the Los Angeles County Economic Development Corp. says the nationwide declines in home video revenue will cause an additional $500 million in losses as more than 9,000 related job cuts wipe out almost $400 million in wages, primarily in Southern California. The dramatic assessment comes amid growing popularity among recession-wracked consumers of ultracheap disc rentals offered by Redbox and other DVD-kiosk chains.
Three Hollywood studios — which number among businesses supporting the nonprofit LAEDC — are engaged in a court battle with Redbox over their efforts to prevent DVD releases from finding their way into Redbox kiosks. Redbox has sued Universal, Fox and Warner Bros. over what it calls antitrust violations.
LAEDC vp Gregory Freeman, who wrote the report, said Redbox’s low pricing amounts to failure to recognize traditional price points on new releases.
“The economics of the motion picture industry are based on exclusive release windows which allow price differentiation; that is, some earlier transactions take place at higher price points,” Freeman said. “Redbox, or any other distributor that weakens the release-window model, could reduce overall industry revenue. Lower revenue will likely lead to lower production activity, hurting the Southern California economy.”
This report comes on the heels of our earlier story about Hollywood creating rental only version of discs and trying to drive consumers to buy DVDs and Blu Rays instead of renting them.
Here’s a thought… Since Redbox isn’t doing anything illegal, *change your model*. yeesh
This supposed “$1b loss” would seem to be based on the idea that if a consumer cant rent a movie then he/she would automatically go out and buy it, which is absurdedly not true.
“Oh I cant rent this movie for ($1, $3, $5, whatever price), I better go out and spend $20 on it”
Yeah right.
If the studios really wanted us to buy instead of renting, then they would be protesting and posting “losses” due to BlockBuster, Hollywood Video, and other rental stores.
I’m with Gazerbeam. Studios should stop whining and adapt. It’s the joy of capitalism people. Redbox came up with a business that makes them money. Good for them. As long as they’re not violating any laws, more power to them!
Once again these executives are morons. Like Gazerbeam said, they need to change their model. There a ton of movies that I watch or stream from Netflix, but would never buy. Also, the movies I would buy I don’t rent, like Star Trek. Get a clue executives.
One billion dollars is nothing compared to the losses blacksmiths have taken since the invention of the automobile … yeah, maybe it’s time to change your business model.
LAEDC vp Gregory Freeman, who wrote the report, said Redbox’s low pricing amounts to failure to recognize traditional price points on new releases.
To me that statement means that the movie studio’s are engaging in price fixing. That is illegal!!
Mabe the Govt should go after them for a change and leave the consumer alone.
Hollywoods biggest problem with the Redbox model is that it allows people to gamble a buck on a new movie instead of the $20 dollars hollywood is used to overcharging to view there increasingly worthless products.
They should be happy to get anything considering how easy it is to BT movies for free.
I’m in agreement with others here, it’s call competition Hollywood! So basically, they are mad because their current business model isn’t tough enough to stand up to someone elses business model.
And from the department of Pulling Random Numbers Out of their Asses comes this little nugget.
Hollyweird never ceases to amuse me. Clues, they just don’t have them.
Mike said … “Potential revenues not realized = Business losses.”
Well … most people who have money in the stock market, when the market goes down, will say they “lost” money. When, in reality, they haven’t …yet .. not until they sell. And if they still get more than they paid .. they haven’t “lost” money .. they just didn’t make as much as they could have.
Oh dear, welcome to the real world Hollywood. They have been losing money for years, and have continued to blame piracy and rental resale. There is a worldwide recession ongoing and people don’t have as much disposable income as they used to, but the main reason they have been losing money is due to the fact that most films coming out of Hollywood are rubbish.
This is all based on New Math. Something we are seeing more and more in all areas of the country. Potential revenues not realized = Business losses. When the hell did this happen.
By this logic, we will lose $1 Billion next year due to radio listenership.
I’m putting in for government assistance right now.
A new competitor enters the market and undercuts the existing players with the help of a new technology or distribution method, lowering the existing players sales and profits. They teach this type of behavior and outcome in Microeconomics 101.
While it is theoretically possible that major studios business model could be affected by Red Box, I don’t see it affecting independent film makers. In fact, Red Box can potentially help independents if large studios actually were forced to produce fewer feature films Red Box would need more product to offer consumers and the Indies could fill the gap.
Its not the consumers problem if an existing industry can’t cope with changing market conditions.
I will have to agree with them 1 billion is probably real. But blame Hollywood. I buy the movies that I want to watch more than once. They are making more, and more movies that pay a $1 to see you still feel cheated out of the dollar. I saw 3 movies in theatres this year that were a waste of money so now I’m see less than I was. So Hollywood is making too many crappy movies.
Here’s an idea. If they are wanting more people to buy instead of rent, cut their prices and make it more reasonable to buy instead of rent.
Why would someone buy a video they may watch once or twice for $20-50 when they can just rent it for a couple of dollars?
People are complaining about the economy and whether they will have a job tomorrow. People are alot less likely to spend money on frivolous things like this. I think that’s the biggest reason why RedBox and other $1 rentals are making it so big now and the big box rental stores are slowly going under.