The Movie Studios Have A Great Idea To Ramp Up Piracy. And Blockbuster Wants To Help.


3391612981_74a744b44aMovie piracy is a problem, but it’s not as huge of a problem as music piracy was this past decade. While certainly the size of the movie files and the need for fast broadband connections to get them in a reasonable amount of time plays into it somewhat, also helping is the fact that there are some fairly decent ways to get movies quickly, for a pretty fair price these days. And now Hollywood is apparently trying to change that.

The studios are starting to rally around a horrible new idea: Keeping new releases out of Redbox and more importantly, Netflix for 30 days. Let me repeat that: They think Netflix shouldn’t be able to ship many new movies to you until 30 days after they’re released on DVD.

Now, this doesn’t appear to be set in stone yet for Netflix, as the studios are said to be currently negotiating this with the company, but it is what the studios want. And the strategy is going forward with Redbox, which recently filed a lawsuit against 20th Century Fox over the same issue. And now, with Universal and Warner Brothers getting on board, another lawsuit seems likely.

And in a move that couldn’t be less surprising, Blockbuster is on the wrong side of this. Despite the company having a strategy to do a massive roll-out of kiosks like the ones Redbox has, it is all in favor of the 30-day window, based on comments CEO Jim Keyes made during its Q2 earnings call.

Why? Well the company once again completely bombed in those earnings, posting a net loss of $36.9 million, while overall sales fell 22 percent in the quarter. It is getting fleeced by the likes of Redbox and Netflix and needs to gain some sort of competitive advantage in movie rentals. A 30-day rental window for its stores would certainly offer that.

Of course, as the name synonymous with movie rentals for the past couple of decades, Blockbuster could have used its power to get ahead of some of these trends (by-mail rentals, cheap kiosks, online rentals/streaming), but didn’t. So now they will have to rely on the movie studios attempting to put stricter rules in place for gaining access to its movies right away. Rules, that would seem to be basically prodding users to obtain those movies illegally.

If the studios are allowing some places like Blockbuster stores to rent movies on day one, but limit Netflix from doing the same, how many of the millions of Netflix users are going to drive to a Blockbuster store to get that movie? Some certainly will, but a lot will also turn to the web and simply download the movie. And some who have never done that before will learn how to get around such a ridiculous restriction.

And Blockbuster’s comments on this are pitiful. Having failed so far with its movies-by-mail approach, online approach, and set-top box approach, Blockbuster is now turning to kiosks. It hopes to have some 2,500 of them by the end of the year and 7,000 of them by next year. Some of their ideas for them are pretty laughable (a good example is the digital transfer of movies to portable media players, but no iPod/iPhone support, meaning that basically no one would use them), but more importantly, Blockbuster is against the two things that made this solution work for Redbox: Availability and price.

Keyes comments during the earnings call indicate that he believe the $0.99 price that Redbox offers its movies for is far too low for a sustainable model. He probably doesn’t mean for Redbox’s end, because they seem to be doing just fine — which is to say, just about the opposite of Blockbuster — using that model. Instead, he seems to be saying that Hollywood can’t survive on such a model, which again, is probably not true, but it’s good that Keyes is the movie studios new PR agent.

Here’s the best part of what he said though:

A vending rental window would enhance the complementary relationship between Blockbuster stores and Blockbuster kiosks. On Fox, Universal, and now Warner titles, for example, we can be far more aggressive in filling the store shelves with product to assure 100% availability of hot new releases. After 30 to 45 days, we can then make use of that product in our vending channel at a substantially reduced cost of goods, since that product will be partially amortized. Our customers can then use Blockbuster stores for depth and breadth of selection and assurance of hot new releases being available on Friday night or Saturday night. The customer can use vending kiosks then for value and convenience.

So basically, he wants to use the studio’s ridiculous 30-day window to prop up his own stores, which are flailing badly. He sees a movie rental ecosystem in which you get new releases from Blockbuster stores, and then slightly older options from the kiosks. Of course, both of those methods of getting movies are already dead, Keyes just doesn’t realize it yet.

He’s investing in these kiosks because Blockbuster has failed elsewhere to make inroads against competitors. But eventually, everyone knows that all of this distribution is going to go online, and then Blockbuster will be left with thousands of kiosks that are useless, just like its store are becoming. At least those won’t be the black holes for money that the stores are, I guess.

Supporting Hollywood’s ridiculous and dangerous idea to place 30-day rental holds on Netflix and Redbox, might prop up his failing brick and mortar stores a bit, but the idea that it will save them long term is laughable.

And Hollywood shouldn’t be tricked into thinking this 30-day rental window is a good idea because they have Blockbuster’s support. Blockbuster doesn’t matter anymore. And they well pay for that mistake in piracy.

[photo: flickr/gwaar]

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