The Blockbuster Theory...

I thought this week I'd actually get back to topics related to DVD...

As you are all well aware by now, I live in Canada. In Canada, there are two major video rental chains (by major, I mean there are at least three within five minutes of my home), one is Roger's Video, a subsidiary of the Canadian cable giant and the other is video rental staple, Blockbuster.

Now, here in Calgary, Roger's Video rents DVD movies. The selection for rent isn't great, but since there are three stores within five minutes of my home, and all three carry a different selection of DVDs, it makes for easy rental of most major titles. If I'm looking for something a little more obscure, then I have to drive downtown to Video & Sound, easily the best DVD rental shop in town (I think they literally have a copy of everything for rent).

Still, though, we all know that DVD will not take off as a rental format until Blockbuster commits to it in a big way. As it sits, they have "select" stores renting DVD, and quizzing the money-takers at the counters in stores which don't rent them results in either non-answers ("in the future we will be renting DVD") or answers which are uninformed - to put it nicely ("as far as I know, we don't ever plan to rent DVD").

The real question becomes, why hasn't Blockbuster really committed to DVD rental yet? Other chains like Hollywood Video and Roger's have had great success with DVD rental, and quite frankly, DVD and adult films are what allow smaller independent stores to survive these days.

There are some simple answers, but perhaps some more complex ones as well. The simple answer is that the DVD market isn't big enough. I would've bought this answer back when there were only half a million DVD players out there. Now, though, we're faced with the prospect of more than three million DVD players in homes by the end of this year. This is starting to become a significant portion of the market. It doesn't make sense for Blockbuster to ignore the DVD market when this is where the growth is going to be over the next few years.

Another answer is the cost of investment for renting DVDs. They basically have to buy a bunch of DVDs and put them on the shelves. It's not cheap, but it's not that expensive either. To put this in perspective, Blockbuster started renting Playstation games when there were around half a million systems out there. Playstation games cost Blockbuster around $40-60 (Canadian funds). This means that in order for Blockbuster to pay for a rental copy of a Playstation game, they have to rent it ten to 15 times. DVDs should by all rights, cost Blockbuster around C$15-20. It's not hard to see that they don't need to rent a DVD that many times before it's paid for (at most, five rentals...it could probably be paid for in a week). With over a million DVD players out there right now, it's obvious that the marketplace is big enough to support rentals.

A more complex answer comes in the form of the scourge of DVD, Divx. Divx offers a pay-per-view system which is in direct competition with Blockbuster's bread and butter, rentals. Of course, if Divx were to take off (which it won't), Blockbuster could hone in on this market very quickly AND (here's the key), very cheaply. If the discs are retailed to consumers at around $5, that means that Blockbuster wouldn't be paying much more than $3. Of course, they wouldn't get anything other than the initial sale in this case, but a one time chunk of change is better than no chunk (which is what they're facing with their other life-threatening and potentially successful competitor, Pay Per View). Also, Blockbuster could easily get in on the back end by making a capital investment in Divx. It's not secret that Blockbuster was looking at this option not too long ago, and backed out because the market wasn't there. If Armageddon were to come and Divx actually took off, expect Blockbuster back at the negotiating table very quickly.

There's one last answer which most people seem to have overlooked. The last major Hollywood studio to back DVD was Paramount Pictures. Paramount is a subsidiary of Viacom, as is (you guessed it!) Blockbuster. Now, Paramount will eventually be sold off by Viacom, as will Blockbuster, (Paramount's been sold more times than a cheap hooker on a Saturday night) but while they're both under the same umbrella, it makes sense for their "corporate visions" to be in unison. Also, Paramount is one of the biggest promoters of Divx. It's no secret that they like to have absolute control of their content. They like the idea of them being able to control if you can watch Star Trek II: The Wrath of Khan on Divx a week before Star Trek XVIII: Who Took My Geritol? comes out, and to be able to cash in on each and every viewing of one of their pictures. This is an idea that all the studios like, but most are smart enough to realize consumers won't swallow. It's quite likely that we won't see a firm DVD commitment from Blockbuster until Divx's corpse begins to cool (which will be sooner than anyone expects). In the meantime, we have all those great independent video stores to carry us, and they'll be able to take a bite out of Blockbuster's ass. Of course, should that bite start to be too large, expect Blockbuster to make a giant corporate about-face and pretend that nothing unusual happened.

The irony to me is that by refusing to rent DVD in a major way, Blockbuster is simply helping their competition creep up on them. If they begin to rent DVD, it builds consumer confidence, which sells more DVD players, which means more people to rent DVDs to, etc. etc. The big advantage of DVD over Pay-Per-View (and Divx) is extra features. People aren't renting just the movie, they're renting the special content. Director's commentaries, behind the scenes featurettes, DVD-ROM content, etc. These are things which PPV (and Divx) don't offer. They're also renting incredible picture quality, and incredible sound. Pay Per View offers these features, but not with the selection Blockbuster can offer. Quite frankly, DVD is the last bastion of hope for the rental market. If Blockbuster can't stop people from renting movies with their remote control at home, they don't stand a chance.

Now, there is something else that really irks me about Blockbuster's DVD policy. While they refuse to commit to rental in a big way, they seem to have committed to DVD sales. This in itself is not a bad thing (in fact, it's a great thing). What pisses me off is their pricing policy. The average price of a DVD at Blockbuster is around C$10 higher than other stores around town. Now, they do have their "buy eight DVDs, get one free!" policy, but this means that I'm paying an extra $80 for a "free" DVD - to put it simply, get bent. I'm much happier to buy my DVDs at Future Shop, or A&B Sound or even Roger's Video (where the price is only $2-3 higher than mass market retailers). Hell, at Roger's I can even RENT the movie on DVD and see if it's worth owning - what a novel concept.

By keeping their DVD prices high, and not renting DVDs, Blockbuster has completely shut themselves out of the DVD market. People interested in renting movies before making a purchase can't rent at Blockbuster, so they go to a local independent store or Roger's or whoever, but not Blockbuster. By pricing their DVDs so high, those people interested in purchasing DVDs go to anyplace BUT Blockbuster. And because they don't rent DVDs, they won't even get the "impulse purchase" from someone who stopped by to rent.

If anyone at Blockbuster is reading this, and can offer some further enlightenment, I'd be delighted to update our readers. Quite frankly, right now you're leaving yourself out of the fastest growing market in home entertainment.

OK. On to the regular weekly stuff...

Last week's quote went unanswered. Either nobody's reading, or I'm making them too difficult. It was from, of course, "A Bug's Life", and if you haven't seen the film I heartily recommend checking it out. Very funny stuff, and not just for kids.

This week, I have a quote from a classic sci-fi film. Name the film and the actor, the character name is unnecessary (and if you get the quote, you'll know what I mean)...

---- Customer: The .45 Long Slide, with laser sighting. Clerk: These are brand new; we just got these in. That's a good gun. Just touch the trigger, the beam comes on and you put the red dot where you want the bullet to go. You can't miss. Anything else? Customer: Phased-plasma rifle in the forty watt range. Clerk: Hey, just what you see, pal. ---

I'll probably rent Babe: Pig In The City tomorrow night on DVD, if it makes it up here...sometimes the Universal DVDs seem to take an extra week to get to Canada. If I rent it, I'll be sure to post a review. I'm a fan of the original, and I missed the sequel in theaters (as did everyone else, I think). I also plan on purchasing the X-Files movie tomorrow. Fox DVDs seem to get here on time usually (and cheap, too!). I also have reviews brewing for some smaller pictures, a review of the VHS edition of Last Night (which I found out American viewers will be able to see in theaters this fall, courtesy of Lion's Gate Entertainment), the VHS edition of another Canadian film, Cube - one helluva freaky psychological horror. I'll also be posting reviews of the DVDs for Pleasantville, Die Hard I and III, Pulp Fiction (Canadian edition), Trainspotting (Canadian edition) and City of Angels once I get around to writing them.

Until next time...