Movie rental stores have changed, starting as physical outlets on various streets and eventually opening online fronts to offer their services. Despite these changes, they are here to stay-only in ways we had not thought about before. Movie rental stores now offer video on demand services online at a competitive price of $2 to $4 per film, almost the same rate as pay per view services.
Video on Demand ( VOD ) refers to a system that allows users to watch content on the Internet whenever they choose to do so. Most VOD vendors such as Amazon.com and Apple also act as movie rental stores, completely redefining the movie rental business.
Movie rental stores are no longer just physical addresses that users must visit to get new movies to watch. Innovative offerings such as flat-rate DVD-by-mail services now dot the video rentals landscape, allowing users to receive DVDs in their mail, watch their favorite flicks and return the DVDs through the post.
A critical look at the business models of two movie rental stores, Netflix and Blockbuster, shows the gradual change and not the demise of traditional movie rental stores. These two stores adopted online stores in addition to physical video rental shops and also provided online streaming of media content as part of their innovative approaches to meeting demand in the movie rental market.
Netflix is a subscription-based television show and movie rental service that offers media content to clients in the U.S., Canada and Europe via live streaming and the mail system. Founded in Scotts Valley, California by Mark Randolph in 1997, the Netflix website went live in 1998, offering an online version of the traditional pay per rental model. Today, Netflix has built its reputation by providing unlimited rentals at a flat fee without fines for late fees, due dates, shipping and handling fees and per-title rental fees.
Blockbuster LLC, formerly known as Blockbuster Inc., began business as a home video and video game rental shop in America. With advancements in Internet technology and changes in customer expectations, Blockbuster added video on demand services and a DVD-by-mail option to its existing services. Founded in 1985 in Dallas, Texas, Blockbuster has experienced massive competition from Netflix and other new entrants into the video rental market.
The first driver of innovation in this market has been the growth in size of the independent film industry. Netflix has played a significant role in developing this industry by distributing films such as “Sherrybaby” and “Born into Brothels” through its subsidiary companies. The need to find an outlet for such low-budget films led these films’ producers to seek cheap alternatives to in-store distribution, so they turned to distribution online. Other producers followed them online, and movie rental stores had to adapt fast.
As a result of the volumes of new film content that gets churned out daily, the need arose for immediate provision of content as soon as it became available. Today, this added feature has become a competing point for various rental companies. The only way for such stores to compete is to offer video on demand.
Recently, YouTube’s video rental service has continued to change the way movie rental stores will work going into the future. Starting out in 2011 as video rental store for independent films, YouTube’s service has steadily added high quality content to its rental library as mainstream movie studios become comfortable with the idea of streaming video on demand almost at the same time as they release films to DVD. It is clear, from this scenario, that movie studios play a significant role in the movie rental market.
The other major reason movie rental stores will remain side by side with Netflix and other forms of VOD is because the cost of DVDs and other video storage media will continue to decrease, while the experience of watching video at home on a television set will get better. The television industry is developing television screens that promise and deliver outstanding picture quality in both two and three dimensions. This means that as more families buy new television sets and get to enjoy their superb quality, they may want to subscribe to a DVD-by-mail service. However, this idea is also at the mercy of Internet-enabled television sets. As the user experience on the television set improves in an unprecedented way and television sets develop more processing power, most users will stream videos on demand straight to their televisions.
