Blockbuster steps in to facilitate a disc-rental market

By Scott Brown
Updated August 10, 2001 at 04:00 AM EDT
Credit: Illustration by Peter Hoey

Okay, America. By the end of the year, 24.8 million of you will own DVD players. In 2001, you’ll spend $6.2 billion on discs. But don’t stop now: The minute your buying frenzy flags, those platters may become a lot harder to get.

The future, according to Blockbuster Video, is rental. With DVD transactions set to comprise 20 percent of its business, the chain (which recently reported a sales decline) is moving to adapt to a changing marketplace. It also released research concluding that studios could make an additional $1.1 million per DVD title if they impose a VHS-style rental window. That means DVDs could retail for upwards of $50 in their first several months of release. But in the sales-driven DVD market, is that such a good idea?

”Some people would argue that VHS started as a sell-through business, but it really took off as rental,” says Dean Wilson, Blockbuster’s chief worldwide merchandising officer. ”We see that same opportunity for DVD.” And Blockbuster is taking steps to see that ”opportunity” realized: It recently decided to reassess its revenue-sharing deals with studios (wherein the chain gets discounted tapes if it turns over a chunk of the profits), increasing the chance that studios may eventually raise DVD prices to make up for lost revenue. While a price hike would goose the DVD rental market, it could only dampen direct-to-consumer sales. ”The big preference has been to own DVDs,” says Donna Beadle, a spokeswoman for Best Buy, which (along with Wal-Mart and other mass merchants) has been one of the DVD boom’s biggest beneficiaries. ”DVD has been the fastest-growing, most widely accepted new technology in [home video] history. Why change?”

Indeed, there’s no looming rental revolution. ”Studios are healthy, indies are healthy, Blockbuster’s healthy,” says Mike Dunn, an exec VP at Fox Home Entertainment. ”Everyone’s having their cake and eating it, too.”