Priced to own? Studios seek to stem losses by restricting rentals of new DVD releases

In a seemingly Scrooge-like move, Hollywood studios may soon restrict newly released DVDs to sales-only for several weeks before allowing them to be available for rental from places such as Netflix, Blockbuster or your local video store.

Keen on reversing the trend of falling DVD sales and dwindling revenues, movie studios are considering such plans that would likely begin next year, the Los Angeles Times reported, citing people close to situation at several studios. And what does DVD-by-mail giant Netflix have to say about it?
In a conference call with investors Thursday, Netflix CEO Red Hastings sided with Hollywood studios' efforts, saying his business is "less dependent on new releases than our DVD-based competitors." Further, Hastings believes that Netflix could benefit from a short sales-only window, allowing the company to spend less on discs and more on streaming content.

It helps, too, that Netflix gets the bulk of its business from renting a vast array of DVDs from its huge catalog of movies, TV shows and other videos. That isn't the case with upstart Redbox, an automated DVD rental system that rents movies for $1 a day. Since Redbox dispensers are situated in grocery, department and convenience stores, on-hand inventory is limited and often reserved for the most in-demand titles, frequently, new releases.

Universal Pictures, 20th Century Fox and Warner Bros. have attempted to impose a one-month no-rental period on Redbox, believing the kiosk's $1-a-day fee gives movie fans little reason to pony up much more than that to buy a freshly minted DVD. Redbox responded by suing the companies.

But an inclusive ban on all rental companies may be enough to bring Redbox on board and end the court battles. A company spokesman implied that Redbox would go along with a sales-only window if it wasn't singled out, telling the Times, "We must have a level playing field and the right to buy movies at the same time as any of our competitors."

Such a plan would be made more palpable if Netflix, Redbox and the struggling Blockbuster were given lower wholesale prices on DVDs than those paid by retailers, which pay $18 for most DVDs and $25 for Blu-ray discs, the Times said.

Netflix's Hastings believes everyone could benefit if pricing is set right. Still unknown, however, is if Americans will be willing to wait possibly weeks to rent Hollywood's latest releases. And given consumers' recent tilt toward thrift, it's a dubious bet that they'll be crowding Walmart, Target and other retailers at the first chance to buy their favorite new movies, especially at prices many times higher than renting them.