While MPAA watches SOPA crumble, digital rentals rise as physical rentals decline

As more consumers turn to streaming video rentals on services like Amazon Prime, Vudu and iTunes, physical disc rentals are falling and leaving movie studios wondering how to best distribute films.

According to a new study conducted by the NPD Group, video-on-demand and streaming video from services like Netflix were on the rise during 2011 and 31 percent of all rentals in North America are attributed to digital delivery options. Alternatively, total physical DVD and Blu-ray rentals fell by 11 percent over the year due to the decline in Blockbuster as well as flat Netflix growth. Redbox is the only bright spot in the physical rental market as unit volume increased by 29 percent over 2010, thus increasing Redbox’s share of the rental market to 37 percent.
According to Russ Crupnick, senior vice president of industry analysis for The NPD Group, he stated “There’s no doubt that Redbox has been the largest beneficiary of the collapsing brick-and-mortar store rental business, especially with ongoing Blockbuster store closings and the fact that there are also fewer independent stores than the prior year. The Netflix share erosion may have resulted from their recent well publicized challenges with pricing, and from their now defunct Quikster experiment; however, they are in the process of shifting customers to their Watch Instantly option, so not all of the physical movie rental share drop is a net loss.”
Movie studios have been in a constant struggle with physical delivery systems like Redbox and Netflix due to a general lack of control over pricing. For instance, Warner Brothers recently doubled its 28-day window for Redbox, Blockbuster and Netflix to receive newly released films in addition to halting discounted DVD sales of HBO discs to Netflix in an effort to help preserve falling DVD sales; approximately 15 percent of the studio’s yearly revenue. Studios have also been extremely slow in rolling out support for digital delivery and are currently pinning all hopes on a new technology attached to Blu-ray discs called Ultraviolet. However, the studios have had an extremely difficult time educating the public on the the cloud-based digital locker over the last few months.
The lack of innovation in regards to developing a studio-owned, industry created platform for purchasing movie rentals has allowed competitors like Apple, Walmart, and Amazon to cut into studio profits with user-friendly applications that are compatible across many popular devices like the iPad and Xbox 360. Sony has the strongest grasp on a digital platform to distribute films from Sony Pictures in the form of the PlayStation 3 and possibly the upcoming PlayStation Vita.

While movie studios stumble through the digital age vastly dependent on Internet companies to distribute its content, the MPAA has turned to piracy as the reason for loss of revenue, hence the support for SOPA (Stop Online Piracy Act). As SOPA support is currently evaporating due to a massive outcry from Internet users, MPAA chairman Chris Dodd is calling for a summit between content creators, like movie studios and video game publishers, and Internet companies such as Google. Dodd is seeking a compromise on the issue and declared that he had never seen “an effort that was moving with this degree of support change this dramatically” over the past forty years.
Chairman Dodd is actually barred from attempting to influence any member of Congress regarding SOPA or any future form of the bill due to legislation that bars any former member of Congress from lobbying current members for two years after leaving office. According to Dodd, he has only been working in a strategic capacity in regards to pushing SOPA and PIPA (PROTECT IP Act) through Congress. Dodd has partially blamed Hollywood’s actors, directors, writers, producers, and support staff for not mobilizing support against the Internet movement in order to help the two bills pass.
One studio that is attempting to innovate the process of digital rentals is Lionsgate. They recently announced the simultaneous release of Taylor Lautner’s Abduction on Blu-ray and Facebook at the same time. The movie was released on the social network on January 17 and costs $3.99 for a standard definition rental of the film. While Warner Brothers have been streaming previously released, older films on Facebook such as Inception, this marks the first side-by-side release of a physical disc and a streaming counterpart on Facebook.