Tuesday, September 22, 2009

Movie Rentals Biting Into DVD Sales

In echoes of Wal-Mart, online content suppliers Apple and Amazon have become too important to the studios for them not to do business, but Apple and Amazon run on such thin margins they are taking a big slice out of conventional DVD sales, which are much more lucrative to the studios. You can read more details here.

The question is now can the studios recover from their own short-sightedness and failure to put together a profitable online business model? Will they cut prices on DVDs (and Blu-Ray) to try to prop up sales? Or will they do something most of Wal-Mart's suppliers are afraid to do and play hardball? My uneducated guess would be a little of both... push the content providers for a little more margin, because if the studios cut off the providers people will likely go and rent or buy movies the old fashion way, while cutting the MSRP on movies a bit (and roll out the back stock very heavily discounted) to try to reduce sales erosion.

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