Study claims that Redbox may cost the entertainment industry $1 billion in revenue
It appears that “the Red Scare” has once again hit Hollywood, but this time it isn’t Communists. It’s DVD rental kiosks.
According to Video Business, a study released on Monday by the Los Angeles County Economic Develoment Corporation (LACEDC) (PDF link) entitled “The Economic Implications of Low-Cost DVD Rentals”, an alternate title could have been, “Redbox is a bully and won’t give us our ball back.”
Make no mistake, this report is nothing but an attack on the Coinstar-owned Redbox DVD rental kiosks, and how its $1 per night rental structure is going to do nothing but cost companies revenue, lost jobs and deprive municipalities of tax revenue. How the study reaches these conclusions takes some mathematical gymnastics:
In the event that new releases are available in Redbox kiosks at street date, there will be erosion of retail revenues. Additionally, to the extent that consumers substitute away from higher-priced rentals to lower-cost rentals, there will be erosion of rental revenues. While the magnitude of the revenue loss is difficult to disentangle from the myriad factors threatening this revenue stream, we estimate overall industry revenues of $1 billion or more will be foregone.
For each $1 billion of revenue in the domestic home video industry, the motion picture industry earns $520 million. Using the motion picture industry in Southern California as representative of overall industry activity, an extra $520 million in industry revenue would translate into direct, indirect and induced economic activity, including:
- At least $1,493 million in economic output (as measured by business revenues)
- At least 9,280 jobs with annual earnings of almost $395 million, of which at least 2,290 would be in motion picture and sound recording industries with earnings of at least $109 million
- Up to $35.4 million in contributions to health and welfare funds for guild and union members, the majority of which would occur in union plans for below-the-line employees
- Over $30 million of tax revenues at state, county and local levels.
In short, Redbox is nothing but evil personified as, well, a red box.
As the name of the organization that sponsored the study implies, it is heavily vested in the job market that surrounds Hollywood. With the current legal battles Redbox is fighting against Universal Studios Home Video, 20th Century Fox Home Entertainment and Warner Home Video, the fact that LACEDC finds the company evil shouldn’t come as a surprise to anyone.
The study does state that some of the loss of revenue can be blamed on the current economic climate, as well as people changing to watching streaming video content, playing video games and spending time on social networking sites. This reminds me of something I heard a speaker say at a video retailer conference in the 1990’s, “We are currently in a war for customer’s disposable free time.” and if that was true then, imagine what it must be like today.
Redbox is sadly making a very convenient target for the video industry at this time. It’s easy to take aim at a stationary red box as the source of all your ills because it saves you from having to look at yourself in the mirror and see what it is you are possibly doing wrong yourself.
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December 9th, 2009
Or Hollywood could stop remaking remakes of remakes.