Dvd Rental Industry Analysis

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Industry Analysis

The DVD, game, and video rental industry consists of companies that provide both mail-distributed and in-store or kiosk rentals. This does not include on-demand or online streaming rentals. 2011 industry revenue is projected to be $6.6 billion, with a profit of $243.5 million. This represents a 12.4% decline from 2010. The industry has been declining, and is projected to continue to do so, as a result of the increasing popularity of substitutes to hard copy DVD rental. Video on demand services offered by digital cable and satellite networks make video rental from a store or by mail unnecessary. Instead, consumers have instant access to new movies. Furthermore, movie distributors are now offering their movies to these networks much more quickly than in the past. Previously, movie rental stores had new movies for rent anywhere from 30 to 90 days before the same movies became available on pay-per-view. This is no longer the case. Since the large majority of rental income is made within four weeks of the release date, the DVD rental industry has seen a severe drop in profits because of this new trend. Online video streaming has also proved to be a popular substitute to movie rental. It is estimated that 54% of Americans watch movies through online streaming. These movies, available instantly, have no late fees and no wait times. As streaming becomes more and more popular, the library of movies available online also grows, again making in-store or kiosk rentals obsolete. The wide use of these two substitutes causes industry analysts to project a 13% annualized decline in revenue to $3.3 billion in 2016 for the DVD rental industry. There is also a high degree of internal competition within the industry. Redbox’s main competitor, Blockbuster Inc., has 13.9% market share. Recently Blockbuster has moved to compete more directly with Redbox, closing more than 1000 stores and opening up small kiosks instead....
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