James Delahunty
3 Oct 2007 5:14
While Hollywood insists on only tapping its feet in the waters of the digital download market while it continues to milk physical movie sales to feel safer, major retailers are starting to upset the movie studios by offering ultra-low-price DVDs, even outside of the fourth quarter. With physical movie sales declining, retailers are trying to keep the DVD buyers coming to the stores by offering DVDs as cheap as $3.99.
Target and Circuit City are two retailers that are offering DVDs at this "rental" price. Target customers can buy such movies as The Nutty Professor and Along Came Polly for $3.99, while customers at Circuit City can pick up The Bourne Identity and S.W.A.T for the same price. VideoBusiness points out that 0.8 percent of catalog sales were in the $3 to $4 range as of 2007, compared to 0.4% as of 2005 and 4.6 percent of catalog sales in 2007 were in the $4 to $5 range, compared to 0.7 in 2005.
However, movie studio executives don't agree with what the major retailers are doing for DVD prices. "It's a negative precedent in the business to do that type of lower budget pricing outside of the fourth quarter," Warner senior VP Jeff Baker said. "You would need to see some uplift in unit volume velocity to compensate for that lower pricing to maintain profit margins, and I have not uniformly seen at retailers the necessary uplift in volume."
Keeping prices of DVDs attractively low adjusts consumer expectations of DVD prices. Retailers benefit from offering great discounts to their customers as it brings them to the store, where they hopefully will not just leave with a couple of DVDs.
Source:
Ars Technica