PaidContent is reporting that the movie studios are working out a new licensing deal with distributors where new releases will only be available for sale and then available for rent 30 days later. Evidently DVD sales are declining and rental models are booming (Redbox, Netflix, iTunes, etc.). Certainly there are films where ownership makes sense, children’s movies that are watched ad nausea, personal favorites and workout videos – but the lion’s share of films we watch are one time events. The attempt by the industry to force DVD sales is understood, there is more money to be made. There is money to be made in selling $300 Hamburgers too (as long as you outlaw $5 hamburgers).
I do not think this is another example of Media struggling with technology, this is Media struggling with customer behavior. It seems that the average consumer is gorging media like never before, but like a whale – thousands of small morsels make up a meal. And the economics are almost the reverse of tradition. We are not buying titles, we are renting access, we are not loyal to sources, we are loyal to choice and we excpect our $200-$400/month internet, cable and mobile investment covers the licensing of the content. I have AT&T, Comcast, XMradio, and iTunes expenses. I do not subscribe to a newspaper or magazine and I have not purchased a DVD in years, but my Media costs have skyrocketed. I do not think there are large sums of my money headed to the Studios, they too are earning like whales eat.
The studios are also losing the one-to-one connection with the consumer. Never mind the physical resonance with the brand when we purchase physical media, but the satisfaction of rental is reflected on Netflix, not Paramount. The marketing, packaging, retail and distribution choreography is major part of the Studio’s workload and presumed value.
So, there is still money to be made, lots and lots of money, but in a whole new manner- finish movie, upload to server, collect money forever (no need for grand opening weekends). Just let Apple and Netflix manage marketing and distribution. Best part about this model, the Studios can focus on making great movies, not forcing us to reluctantly buy landfill-destined media we watch once. Making great products means making happy customers – the essence of a good brand and great business model.
(Another thought – Apple has $34,000,000,000 cash on hand – how much of that would they need to buy Netflix?)