Posted by Allan on 09/02/05 21:04

On Fri, 02 Sep 2005 10:50:40 -0700, ric <nospam@home.com> wrote:


>When movies were released on tape, they were either "priced for
>rental" (typically around $99) or priced for sale (usually around
>$39.) Nothing prevented the "Average Joe" from buying tapes priced
>for rental, or renting tapes priced for sale.

Well other than the $100 price tag.

"Studio Pricing Policies

Well, that briefly covers retailers, but how do studios come up with
their prices in the first place? For that, a brief history lesson is
in order.

When DVD was first introduced and strategies put into place, it is
very important to note that the format was initially intended as a
sell-through format, i.e., that consumers would buy them exclusively,
and not rent them. As we know with VHS, which has, until somewhat
recently, mainly a rental format, titles "priced for rental" cost
considerably more than a title "priced for sell through." Many
consumers have been taken aback when they inquire about purchasing a
new VHS title only to find it is priced at $89.95 or higher. Why are
some obscure titles, which seem like stuff no on would want, priced
for rental at $90+, while popular titles tha seem like studios could
charge big bucks for and still get away with (Jurassic Park, etc.),
still priced cheaply at $19.95 or less?

The answer is twofold. Let's face it, most movies you don't want to
own. Think about all the movies you've seen and the ones you would
actually buy. And distributors and studios know that video stores have
to order at least one copy of a every new release, no matter how
crappy it is. And, rental pattern tracking at video stores have
conclusively proven that there is an initial "rental phase" for new
titles within the first 1-3 months, when the title rents like crazy,
and then suddenly it sits on the shelf collecting dust after the
intial blitz of interest fades away. We all know perfectly well that
the first thing we do when we go to the video store is head for the
new release aisle (I think it is genetic).

Anyway, over the years, the video business matured and created a
initial 6-month period that that was earmarked for rental titles. They
knew video stores had to order all the new films, so they charge high
prices for the initial rental period, thereby ensuring a good return
even on crap movies, and then after the rental rush cools off, they
reduce the price for "sell-through" to encourage sales to consumers
who still are interested enough in the film to own it. We've all see
the posters at Suncoast or wherever proclaiming a title "Now Priced To
Own!." Blockbuster has also made a killing on all those
previously-viewed titles, where the sell off the tons of extra copies
of "Scream 11' or whatever that aren't renting anymore. Conversely,
bigger titles, like Jurassic Park, have such a high level of consumer
interest for purchase (as do Disney animated titles, which children
can watch over and over and over) that it makes more sense for the
studios to skip the rental period and price directly for sell-through
at the beginning. And a look at the sales charts bear this out...the
recent VHS release of Titanic proved it was a monster in sales,
racking up millions of units, but failed to reach the number one spot
in rentals. Clearly, some titles are more suited to be priced for
sell-through initially than rental, and vice versa.

It is also an important side note that one of the prime reasons for
the rental/sell-through market are the laws of this country in regards
to the rental concept. The studios initially hated the idea of the
videocassette, and hated even more the idea that retailers could rent
their films over and over and the studios didn't get a cut of all
those profits. So why didn't they sue? Well, they did, and they lost
(so did video game manufacturers). To help get some of that revenue
back was a further incentive for the rental pricing structure, so at
least the studios would get some additional revenue return during the
initial rental phase of a title's life span, which was better than
nothing.

It is definitely arguable that the consumer loses out in this. I know
I have been frustrated in the past when I wanted to buy a VHS title,
but had to settle for renting it because it cost $100. But, we do love
the ability to rent without having to own, and the studios do have a
valid point...why shouldn't they get a cut of the profits from the
products they shed blood to produce?"

http://www.dvdfile.com/news/special_report/features/retail/pricing_primer.htm






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