Hollywood is currently split over the cheap $1-a-night DVD rental prices from kiosk companies like Redbox, but new data from SNL Kagan suggests that VOD vendors should be worried as well. Could VOD companies make money with $1 per night rentals?
The short answer is no. Video Business, which first covered the story, writes:
At a $1 price tag, SNL Kagan determined that VOD distributors stand to make $0.08 to $0.19 per transaction, taking into account studios’ assumed 70% revenue cut. That would result in a loss on the transaction for VOD companies. However, a $3.99 price point consistently yields a profit for them.
Kagan also believes that studios probably wouldn’t get behind the low $1 VOD rental price as well.
The research firm thinks that VOD companies could be vulnerable to Redbox’s low-low value proposition. We’re not so sure. Redbox is convenient, and getting moreso as it expands its number of kiosks around the country. But it still requires getting in a car and driving somewhere (to pick up and drop off). That can certainly be more attractive than waiting for a movie to arrive by mail, or drive to a dedicated video store, but the convenience of pushing a button to beam a movie directly to your TV — especially for impulse transactions — can’t be beat.