If bargain movie rentals are your thing, then you’ve probably already happened on those bright red self-servce kiosks that dispense movie rentals at a ridiculously low price of a $1 per movie per night.
The company is called Redbox, and while their service is an entertainment hit with consumers (they have 19 percent share of DVD rentals), they’ve attracted the ostentatious indignation of studios who are feeling the pinch of major declines in movie sales.
Now new research, embedded below, from the Los Angeles Economic Development Corp. (LAEDC) further paints Redbox as the enemy of the entertainment industry. Data estimates that Redbox’s discounted movie prices will cost the entertainment industry $1 billion in revenue and account for 9,280 jobs lost.
Is Redbox Really the Enemy?
We previously reported that studios were trying to force the hand of Redbox and Netflix to delay new release rentals by 30 days. While Netflix ponders the option, Redbox is suing many of the major studios who refuse to sell them their DVDs. The battle wages on, with some reports indicating that Redbox buys its DVDs from Walmart. If the data from the study can be trusted, we now have further insight into why the struggle is building up to be a battle to the death.
The LAEDC paints a picture of doom and gloom. From the report:
“In the event that new releases are available in Redbox kiosks at street date, there will be erosion of retail revenues. Additionally, to the extent that consumers substitute away from higher-priced rentals to lower-cost rentals, there will be erosion of rental revenues. While the magnitude of the revenue loss is difficult to disentangle from the myriad factors threatening this revenue stream, we estimate overall industry revenues of $1 billion or more will be foregone.
For each $1 billion of revenue in the domestic home video industry, the motion picture industry earns $520 million. Using the motion picture industry in Southern California as representative of overall industry activity, an extra $520 million in industry revenue would translate into direct, indirect and induced economic activity, including:
- At least $1,493 million in economic output (as measured by business revenues)
- At least 9,280 jobs with annual earnings of almost $395 million, of which at least
2,290 would be in motion picture and sound recording industries with earnings of at least $109 million
- Up to $35.4 million in contributions to health and welfare funds for guild and
union members, the majority of which would occur in union plans for below-the-line
- Over $30 million of tax revenues at state, county and local levels.”
As NewTeeVee poignantly points out, the organization behind the study has a vested interest in growing the job market in the Los Angeles area, which could highlight their bias. The LAEDC also admits that other factors, such as the economic client and digital downloads, could have contributed to their findings, admitting “foregone revenues from low-cost new release DVD rentals may be hard to distinguish from other transformational shifts in the industry.”
If the LAEDC is to be believed, Redbox will single-handly bring down both the entertainment industry and LA’s job market. Of course, we tend to take a different perspective and suggest that studios attempt to understand the changing needs of movie consumers, who have clearly already demanded alternative purchase preferences with their wallets. The age of the DVD sale may have passed, but that could be entirely dependent on the changing attitudes and behaviors around entertainment consumption.
Image from Eddie Does Japan on Flickr
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Redbox: The Enemy of the Entertainment Industry? [STUDY]