May
03
I don’t claim to be a math genius, but I was thinking about my previous post about piracy, and came across this thought.
Facts
2001 had $8 Billion in movie rental sales, and $10.3 Billoin in straight movie sales. Lets take some guesses at average rental and purchase price for new releases. Wal-Mart traditionally sells new release DVDs for about $17 each, we will add two dollars because most other retailers are between that and up to $23, so $19 is our guestimated average. Most rental places rent movies for about $3 each. If you divide $8 Billion by $3, you get roughly 2.6 billion million rentals. That’s a large portion of the $8 billion going to the rental places instead of the movie house.
The Math
If you take $10.3 Billion, and divide it by $19, you get roughly 542 million movie sales. Think about that, that’s not even close to the movie rentals. If the movie houses lowered the price of DVDs to a price closer to the rental houses, an amazing thing happens.
If the movie houses dropped the price of new DVDs to $9, they are now making $27.9 billion on sales. So dropping the price, and cutting the rental market, doubles sales. I am not sure what the reproduction costs are on a new DVD, but I guessing it’s not very much. Even if it was $1 per copy, which I highly doubt, that’s still $24.8 billion, over 100% increase in sales. Now I know these numbers are not by any means accurate, they are just a guestimate. But if you think beyond the accuracy of the numbers, into the concept, there is serious benefit to doing this. If they can knock out Netflix, Blockbuster, Hollywood video, and the myriad of movie rental mom and pops, all of the sudden the list of potential buyers gets staggering.
The Bottom Line
So there you have it, it’s not about copy protection or digital rights management, it’s about price management. Drop the price low enough, your sales will go through the roof, and 99% of consumers would have no reason to steal it.
You could probably make the same argument for CDs.