I would do a whole lot more digital rentals if the prices weren't so damn high. How is it that it can be significantly cheaper to rent the physical disk than to stream the movie once? How can I watch 20 hours of stuff on HBO in 4k for like $10 or $12 or whatever that runs now for a month, but a single 2-hour movie is $5?
It'd also help a lot if I didn't need a different "app" for every store, with its own player UI. Learning how to use yet another designer's cute "experience" just to do the same thing I used to do with a few buttons on the front of a VCR that were the same for every single movie, isn't my idea of fun.
> How is it that it can be significantly cheaper to rent the physical disk than to stream the movie once?
Price discrimination or price segmentation is the technical name.
If you are selling an identical good which has near zero marginal cost to reproduce, then the way to maximize your profit is to sell it to each person for the maximum they are willing to pay.
Ideally, you want to sell (or rent) the same movie or tv show or song to someone willing to pay $5 for $5, $10 for $10, and $1 for $1.
In practice, it is logistically infeasible to target each and every person’s maximum price, but you can try to target populations as a whole. For example, grocery stores with no discount to people who are willing to pay more, versus giving out paper coupons or online coupons to those willing to spend time to save money.
In media’s case, I am assuming that the media sellers are betting the people willing to buy online are willing to pay more, on average, than people willing to go through all the trouble of renting a physical disk.
At least in my case, it would ring true. If I really wanted to see something, I would not care about paying $5 in the moment on my TV and start watching in seconds, rather than remembering to get and dealing with a disc from a Redbox kiosk for $1. But there are people who would want to save the $4, and so the content sellers are able to get $5 from me and $1 from the person using Redbox (although they are also losing sales from people not willing to buy at $5 online, and not willing to pay $1 at a Redbox, but the bet is that population is smaller than the total of the other populations).
If you want to sugar to help the medicine go down...
Compare the current digital rental prices to taking yourself to the theater. While the digital rental rate is high, it is less than one ticket for admission. If you buy concessions, it only goes up. If you take someone else, it gets higher. That one digital rental starts to look less steep from this vantage point. That being said, I still don't do the digital rental.
How do you know? I’m a highly paid engineer who is oncall on a SAAS, it’s been a wild ride. It’s expensive to keep this crap running. But a DVD burner and fedex? That sounds cheap and simple to me.
They don't even use burners at that scale, they use replicators. Takes seconds to stamp a DVD. Here's a place in California that charges as low as $.075 each per copy, and this is low volume pricing...
There are companies that provide on-demand pricing for just the steaming component (edgecast for example). Then just throw up a DynamoDB table and some simple apis in lambda and you have a pretty cheap (relatively) way to deliver streamed content.
They probably are making a significant profit off it, I'm not saying that's not the case. I'm just saying you can't figure that out by just looking at the marginal cost; you have to look at the investment and ongoing costs and planned payoff period too, which is information you probably don't have available.
Is it somehow cheaper when it's a subscription, and when the set of things you might start streaming isn't "this single thing I just paid for" but "anything in your catalog"? Because they don't just give a discount for that—they give a tremendous discount.
First Sale doctrine - you needn't pay any licensing fees to rent out a purchased disc. Practically speaking, Blockbuster that was did have special arrangements with the studios, but this paved the way for Netflix to rent out DVDs with little barrier to entry.
It'd also help a lot if I didn't need a different "app" for every store, with its own player UI. Learning how to use yet another designer's cute "experience" just to do the same thing I used to do with a few buttons on the front of a VCR that were the same for every single movie, isn't my idea of fun.