Blockbuster Has Gone Too Far This Time

It was announced this week that Blockbuster will not be renewing the revenue sharing deals they currently have with the major studios. How does this affect you? In several nasty ways. A little background for those outside the video industry:

Originally, video stores bought movies at wholesale – usually anywhere from $65 to $100 for each copy, unless the movie was a big sell through release, such as a Disney cartoon. They bought it, they rented it, and then they sold most of the copies off used and warehoused any extras to use for stocking new stores as they opened.

Blockbuster started strong-arming the studios for better pricing. Soon they came to arrangements known as “revenue share contracts.” Blockbuster began paying $8 for each new movie and on each rental, BBuster would keep $2 and send the studios $1. They also split the revenues from used tape sales (depending on the studio and the contract arrangement.)

Hollywood Video and Movie Gallery quickly hammered out THEIR own arrangements with the studios, and thousands of small “mom and pop” chains were driven out of business, hopelessly unable to compete with chains that could now carry well over 100 copies of the hot movies.

Revenues for all 3 companies soared.

So why is BBuster changing the rules of the gamer It can only be for 2 reasons and each has the same final result:

1. They want to pressure the studios for an even BETTER deal

2. They believe they can make more money elsewhere.

Either way, it is YOU who gets the shaft. Whyr

By the end of this year it is estimated that over 30% of video store revenue will be generated by DVD. Wholesale cost of DVD’s (including bulk purchase discounts) is from $10 to $15 and the video store gets to keep ALL the revenues. If the revenue sharing deals on videocassettes become extinct it will knock a HUGE hole in the revenue the studios now receive. Take a wild guess as to how they will attempt to recoup these losses. You got it. The price of DVD will rise quicker than a MB Admins temper during a flame war. BBuster gets richer, the studios get richer, and the consumer pays the price.

If you doubt the plans behind this action, keep in mind that Blockbuster itself mentioned DVD pricing SPECIFICALLY in the press release.

Blockbuster is powerful enough that they can manipulate the entire film industry with these ploys to better their own market positioning and balance sheets. The only thing MORE powerful is a united consumer base.

I am now officially boycotting Blockbuster Video and ANY other chain that works to bring about an increase in DVD price points. I ask each of you reading this to consider doing the same. DVD is the best entertainment bargain to come down the pipeline in decades. Let’s not let the big boys ruin a good thing.