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The Suit Me Suit You Blues |
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| Written by Bruce Frigeri | ||||||
| Friday, 04 September 2009 | ||||||
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August is usually a quiet month in the film business but this year some Hollywood studios have their long knives out. They are filing aggressive law suits against Red Box and other rental kiosk companies, ostensibly to prevent them from eroding what’s left of their sell thru revenue and hurting their traditional rental customers like Blockbuster, etc. In turn, Red Box has filed their own claims against Warner Brothers. The Warner suit is the third such legal action taken by Red Box in the last year, with earlier actions against 20th Century Fox and Universal still pending. Clearly the $1.00 per rental fee charged by Red Box has the studios nervous. At the same time, Red Box has a great business model that they don’t want the studios to undermine.
However, I suspect that all this focus on sell thru is a bit of a bait and switch on the part of the studios. They are nothing if not smart, and they see as well as anyone that the future of home entertainment profits, especially for new releases, is going to be earned by video on demand.
As currently set up, nothing so closely mirrors the limited selection options of V.O.D. services as the limited selection options of a rental kiosk. Both are heavily biased towards new releases. At the same time, nothing so closely mirrors the convenience of V.O.D. as a rental kiosk. Out picking up some milk, why not rent a movie for a buck? The problem for the studios and the cable operators who provide Video On Demand service is that their average price is $5.00. That would be fives time pricier than the kiosk down the street. Ouch! I’d be worried about competing against a product that’s 80% cheaper too. A few studios have taken a different tact and cut deals with Red Box. The most recent of these involves Paramount Pictures, which worked out an interesting arrangement with Red Box involving access to their rental figures, various opt out clauses, etc. The fact that Red Box would agree to such a deal suggests that they are worried about the outcomes of these legal actions with the more militant studios. From their point of view, a bad deal with Paramount is better than having them become another litigant against them.
All these law suits are creating some opportunities for more rental friendly indie product. My company has had good success placing our films in kiosks over the past few months. Will the lawyers work this out in a way that makes sense for both parties? This is the movie business after all so I wouldn’t count on it. But something has to give. Either the wholesale prices that kiosks are willing to pay must go up substantially or the studios will successfully argue that they have the right to withhold product from the kiosks for a certain amount of time, say thirty days. In the meantime, all this litigation has created the first good news for independent films in quite a while.
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