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Why are on-demand rentals so expensive?

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    Why are on-demand rentals so expensive?

    Back before redbox and netflix killed blockbuster, rentals used to be around $4. They used to be even less than that initially but blockbuster kept raising rental rates until eventually competitors emerged (netflix $8/mo, redbox $1 per night) that priced them out of the market. Cable companies then gave us broadband and began offering on-demand rentals for around $6. And now streaming services like Vudu have come around also charging around $6 a rental.

    Why are on-demand rental prices so outrageously expensive? Why is the cost of a rental through Vudu about HALF the cost of actually going to the theater, but Redbox is able to rent them out for ~$1 at kiosks? I was really considering Vudu until I saw the rates. With Redbox, I can watch 5 more movies than with Vudu so it makes no sense economically to use a service like Vudu.

    A streaming/on demand service that offers movies at the $1-2 would be a Redbox, Netflix, cable killer. I really can't understand why Vudu and others can't price it as competitively as Redbox does at its kiosks.

    #2
    Re: Why are on-demand rentals so expensive?

    Originally posted by jd101 View Post
    Back before redbox and netflix killed blockbuster, rentals used to be around $4. They used to be even less than that initially but blockbuster kept raising rental rates until eventually competitors emerged (netflix $8/mo, redbox $1 per night) that priced them out of the market. Cable companies then gave us broadband and began offering on-demand rentals for around $6. And now streaming services like Vudu have come around also charging around $6 a rental.

    Why are on-demand rental prices so outrageously expensive? Why is the cost of a rental through Vudu about HALF the cost of actually going to the theater, but Redbox is able to rent them out for ~$1 at kiosks? I was really considering Vudu until I saw the rates. With Redbox, I can watch 5 more movies than with Vudu so it makes no sense economically to use a service like Vudu.

    A streaming/on demand service that offers movies at the $1-2 would be a Redbox, Netflix, cable killer. I really can't understand why Vudu and others can't price it as competitively as Redbox does at its kiosks.
    They charge more to make money. I agree it shouldn't be as expensive as it is...after all, they do offer a 99 cent movie of the day and I think they also have some $2.00 rentals (I might be wrong, but seems like I saw them).

    The difference between a streaming service and a DVD rental is that when you rent a DVD rental only you will be watching it on your DVD player. With a streaming service the digital copy of the movie is accessible by more than one person at a time and you are using the service provider's equipment to stream the movie over the internet. Therefore, it would cost a company like Vudu a little more in regards to their infrastructure for you to watch the movie. But I doubt it would cost $5 or $6.

    Comment


      #3
      Re: Why are on-demand rentals so expensive?

      We know the studios set the prices, not Vudu. If you check Amazon, and iTunes, you'll see they are all suffering by comparison to Redbox. Netflix per disc cost is comparable to Redbox.

      Comcast, and DirecTV are even higher cost per movie than Vudu, but that's not much consolation.

      Comment


        #4
        Re: Why are on-demand rentals so expensive?

        Redbox has infrastructure costs too (the kiosks, the reservation technology, credit card transactions, etc) and I presume it has to pay rent on the space their kiosks occupy. Blockbuster had infrastructure too. For many many years, people complained about the high cost of renting movies. Redbox listened. They perfected the pricing model - $1 per night and eliminated the entire concept of late fees.

        Now comes broadband and streaming technology. The rates get jacked up again and infrastructure doesn't explain it. Everybody has infrastructure costs. So either Vudu/Amazon/etc are all colluding to set the exact same price or the studios are setting the pricing (inexplicably much higher than for physical discs), in which case consumers are getting the shaft. No movie is worth $6 a rental. I wonder what the rental volumes look like at the $6 range because at $1-2, there's simply no price barrier to renting the movie. Vendors will maximize rental volume at that price range.

        Comment


          #5
          Re: Why are on-demand rentals so expensive?

          Originally posted by jd101 View Post
          Back before redbox and netflix killed blockbuster, rentals used to be around $4. They used to be even less than that initially but blockbuster kept raising rental rates until eventually competitors emerged (netflix $8/mo, redbox $1 per night) that priced them out of the market. Cable companies then gave us broadband and began offering on-demand rentals for around $6. And now streaming services like Vudu have come around also charging around $6 a rental.

          Why are on-demand rental prices so outrageously expensive? Why is the cost of a rental through Vudu about HALF the cost of actually going to the theater, but Redbox is able to rent them out for ~$1 at kiosks? I was really considering Vudu until I saw the rates. With Redbox, I can watch 5 more movies than with Vudu so it makes no sense economically to use a service like Vudu.

          A streaming/on demand service that offers movies at the $1-2 would be a Redbox, Netflix, cable killer. I really can't understand why Vudu and others can't price it as competitively as Redbox does at its kiosks.
          I would summarize it in one word: greed.

          They are profiting from your never-ending quest for convenience. Of course the overhead for a streaming service is just a fraction of maintaining a network of kiosks (let alone a network of stores with employees!). As long as they all keep it at $6, there is no reason for a price war.

          You want to see lower prices? If all users flock to one service, the others will inevitably drop theirs.

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