In the Red(box)?
John Marmaduke’s post about Redbox is a good one.
For those of you not keeping up, Redbox is a company that went out and bought a bunch of old vending machines and started putting DVDs in them for rental at grocery stores, department stores, hospitals, etc. The automated rental machine just takes a credit card, and charges a very nominal fee for rental.
Marmaduke argues that ‘giving away’ DVD’s at a $1 rental price for products that take hundreds of millions of dollars to produce is an unsustainable business model. Of course, he’s right! As he points out, newspapers have been giving away content on-line for years now, and they are dealing with the consequences – declining revenue and even bankruptcy.
There is a similar parallel in the video gaming industry. The cost of making games is going up, but there is a downward pressure on sales price. Along side the fact that many games are now going digital, there is additional pressure to lower price since consumers don’t value ‘virtual’ product the same as ‘physical’ product.
Personally, I think putting your head in the sand isn’t the right answer. Consumers will likely make trade offs when considering a $30 BluRay purchase vs. a $1/day rental. Perhaps they won’t get AAA content, but they will settle for lower quality (in terms of product and viewing quality). And, if Redbox isn’t the company behind a $1/day rental, someone else is certainly going to jump in and offer something as well.
The industry needs to attack the problem from both ends – finding ways to lower production costs, finding ways to be more efficient in supply chains (both physical and digital) and formulating new monetary models (i.e., micro transactions, subscriptions, etc.)
