New Media Economics: Hollywood Battles Rivals, Diminishing Returns

Diane Mermigas submits:

Fear of diminishing returns from digital distribution is fueling Hollywood studio ire with Redbox's (CSTR) $1 daily rental of new movie releases in what is shaping up to be a major test of new media economics.

The numbers tell the story. Redbox movie rentals are frequently offered for "free" by local merchants seeking to drive store traffic. The increasing numbers of Redbox vending machines (expected to reach 22,000 by year's end) provides the local convenience of a self-serve neighborhood Blockbuster (BBI) compared to the mail-wait of Netflix (NFLX).

The most immediate options -- video-on-demand and iTunes downloads generally $3.99 or $4.99 for a limited viewing window -- seem expensive by comparison. It leaves little doubt about the deteriorating appeal of DVD sales at $15 or $20 a hit, even before you take rampant piracy into account.

Complete Story »