Netflix & Other Low-Cost Rental Venues Cut Hollywood Profits in Half?

by on April 9, 2012

in consumer

Cinema Static - TV News, Movie News and other Entertainment OpinionIn the ensuing piece, I talk about the diminishing profit margins of the home entertainment market and that gets me going about the costs of movies for the movie consumer and the different aspects of where we can spend money and where studios can cut costs or meet the consumer in the middle.

Yes, I rant on!

Deadline Hollywood reported on a financial crisis (?) where profits from the home entertainment venue is dropping radically. And while the pricey DVD/Blu-ray market declines, of both sales and rentals, other cheaper options the consumers enjoy are taking off!

Examples pointed to in this report are $5 rental or $15 digital copy fees vs the $2 rental options and Netflix’s $8 monthly fee, effectively making “rentals” just under 50 cents a movie.

Hence, sales for the studios from the higher priced merchandise venue dropped 40%, when comparing 2011 to 2007. (Or to put it in numbers, 2007 profits dropped from $40 billion to just under $20B in 2011.) One of the suggestions for stemming the tide of profit was to realign business costs in marketing and distribution.

First I don’t think the consumer is going to worry a ton about an industry that is making billions each year. Secondly, it’s hard to argue against consumer costs that cost so much less when looking at $2 vs. $5-15. And the hidden cost is the space that a DVD/Blu-ray might take up!

Space and convenience is the very reason I switched to a Kindle. My book cases are full and I rarely touch what I have. And I suspect that’s what many can say about their own video collection.

I’m also wondering how many times in a lifetime someone will be buying the newest format of a movie so you can play it again, if you ever do. If you think about it, there are many aspects that go into the sale of a title, including how a product is marketed. There’s the resale of titles in new formats, and the life-cycle of a movie when it does come out… who will go see it in theaters, rent it and buy it on DVD/Blu-ray? Who will snatch it right up when it comes to Disc and who will rebuy it when it comes out with special features? Look at Transformers 3. Dark of the Moon came out in “movie only” mode and I have yet to see the special editions with extras, alternate endings and the like. But you know they’re coming, some day.

Of course Netflix was noted in the article, and sure, they have a great selection, But I wasn’t impressed with new newest content selection or how they restrict the consumers ability to modify their viewing history buffer and how they handle things.

The Consumer Has to be Understood

Consumer news, Consumer alerts and a Consumer's opinionTo maximize profits, the marketing wings of Hollywood have to understand the spending consumer. There are those that will spend on all modes of content and others that will wait until a movie hits network television. And there are those that land in the middle of the spectrum.

The middle of the spectrum consumer are those consumers that will or can wait for a movie to land in the home Video on Demand (VoD) service, which in and of itself, is a superior environment and financial bargain for many.

In a home environment, you pay can $5 for two people, maybe $5 for all the popcorn and drinks and you don’t have to put up with self-important people who check their cell phones every 20 minutes. So the homebody pays $10 for two, when going to the movies for the same event could cost probably $25 to $30.

Also if you think about studio costs, they already have a foot up on marketing and can save bucks there. Look around. There are thousands of movie blogs (a’hem) by hyper-appreciative fans that willingly rehash all information about movies and TV shows.

And yet this venue is not fully embraced. As long as well-meaning websites continue to get cease & desist orders, or that certain TV stations make access to their publicity content prohibitively challenging, they seem to buck the available system out there.

But there are those that embrace the fan and the blogs and give them inside access to the content. The gang behind Ender’s Game started their own blog, sharing images and thoughts. J. Michael Straczynski used to have a message bulletin board and that got pretty busy when he was talking his Forbidden Planet remake, but news got incredibly quiet after a leak of his screenplay hit the web.

And then there’s TV Venue.

TV shows and such are a totally different beast and some networks are spitting out some intense, quality content. AMC TV is the first network that comes to mind because they seem to be hitting it out of the park with shows like Breaking Bad , The Walking Dead , The Killing and such.

Or CBS with its plethora of hits like NCIS or CSI shows.

It’s good content and costs less to see than a movie. But then there’s that end of the entire spectrum… the cost of making a movie or TV show.

As any insightful fan knows, nothing lasts forever. TV ratings fade and so too, do the shows. Or as actors want more money and a show costs more than its making, it will fade.


And Sometimes You HAVE To Have the DVD or Blu-ray

Despite saving bucks, there are times it feels warranted to buy the DVD/Blu-ray. One of my all-time best purchase was the discs for Jon Favreau‘s Iron Man. There is a ton of content about the making of, thoughts from the man (Favreau) himself and what not. I truly derived many hours of entertainment from that purchase, and hence with my time and the cost were well merited.

So why can’t we have that content online for us to buy the right see anytime we want? Or is it and I’m that far out of touch? I would think not creating plastic discs would be a money-saver, but I could be wrong.

Meet Us In The Middle and Cut Your Costs

But I have to question some of the costs incurred in making a movie because of what I’ve seen.

Some pretty good and fun indie films are produced with a minimal crew and cast, and the biggest and best known products might be something like Paranormal Activity. There, they dropped $15k and made $183M for PA.

But I’ve seen how movies are made and I have to say, if they start acting like government contractors and looking to cut costs, the consumers price tags might come down… well, maybe stay level, for a long time.

I’ve seen on multiple occasions when a production company lands somewhere with hundreds of people to make a 10 minute scene.

Recently here in the bay area Or recently, when a production company showed up at a house in the Bay Area last November (2011) to shoot a scene for Of Men and Mavericks, it was apparently a few minutes with a actor portraying Gerard Butler’s character as a younger boy.

It was a multi-day shoot for a small scene.

Now sure, I don’t know the ins and outs of a quality production like some of the mega-hit movies, but there has got to be a line drawn somewhere. Doesn’t it? The consumer has to be considered at some point so we can actually not feel stressed about spending more money than we sometimes should afford. Shouldn’t we?

But for now, the warning signs are out there while the studios ONLY rake in $20 billion… and hopefully, in the end, the consumer will win.

(Man, I should give you a prize for getting to the bottom of this eclectic piece!)

If you have other thoughts or ideas, lemme have ’em! You never know who might read this piece!

[ deadline: low-cost-rentals-trash-studio-profits ]

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