Why Are Digital Download Rentals So Expensive?

Christodoulos Foufoulides writes:

Hi, Chris!

First, thank you for your YouTube channel. I have been following your TLDRs and vlogs for about a year now and they have been both educational and entertaining; your work and effort is much appreciated.

I have a question, or more a point of view, of which I was wondering about your own view and insight.

I feel that the film rental industry today is in a roughly similar position to where the music industry was back in the early 2000s, right before Steve Jobs and Apple launched the iTunes Store. Back then, digital options — monthly subscriptions, in particular — were not very appealing to consumers and many people got their digital music from services like Napster and Kazaa. When Steve Jobs was talking with music industry executives, he told them that he believed that 80% of those people didn’t want to be stealing music, but there was just no good legal alternative — and one should be created. He also recommended that songs should be sold individually at 99 cents, not as entire records, making buying music more of an impulse purchase than a big commitment — something that the music executives strongly resisted. When the record companies agreed to it and the iTunes Store opened, Eddie Cue, the head of the Store, predicted that Apple would sell about 1 million songs in one month; instead, it sold 1 million songs in six days! Steve Jobs called it a turning point for the music industry.

Today, in terms of digital movie rental, we have services like Google Play and Apple’s App Store, where just renting a movie costs £3.50 (≈$5.50) in SD and £4.50 (≈$7.10) in HD. I browse the available movies but I don’t press Rent because the price feels so high, especially when buying them digitally or on a disk is about £10 (≈$16). So I revert to my Netflix service and watch something else, albeit most likely older or less desirable, or just browse YouTube. I know that if a rental in Google Play was less, say £1.50 or £2.00, I would be renting about one movie a week or every other week; instead, I rent one or two movies a year. I think that there are many people who feel like me — that renting a movie at £4.50 is not good value for money. If they lowered it to, say £2, they would have both a lot more customers and make a lot more profit at the end just like the iTunes store managed to do for the music industry. In other words, those services did not hit the optimal pricing point for film rental. What do you think?

Thanks, again!

DVDI’m with you.

I would much rather drive down into town to rent a DVD via the Redbox kiosk for $1.50 than spend twice that amount (or more) on a digital rental.

Part of this is due to the continued distaste for digital content on the part of the content publishers. There’s an assumption that delivering digital versions of their content leads to greater risks of piracy. This was evident even during the early days of digital media borrowing when Microsoft introduced the Zune complete with a built-in piracy fee sent directly to music publishers.

There’s also the profitability factor. Movie publishers produce DVDs for pennies a piece and sell them for many times what they cost. Meanwhile, digital downloads are expected to cost less and this cuts into the per-unit profits to the studio and publisher. Apple and Google also want a cut so they can add a good chunk of change to their bottom line.

I’ve stopped short of buying the digital copies of movies at this point because very rarely do I want to see a movie more than once (let alone own it). That might change when I have kids.

I do believe that when exclusives are dropped and real competition is introduced, the price for renting and owning video content will plummet.

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