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Wow, that's not a very scalable business. You need one physical DVD player for every concurrent customer, inventory of all of the DVDs sufficient to handle pea

Wow, that's not a very scalable business. You need one physical DVD player for every concurrent customer, inventory of all of the DVDs sufficient to handle peak demand, and a small staff of bored employees keeping the right DVDs in the drives. In other words, you still have all of the worst features of owning a DVD rental store.

danohuiginn 16y ago
yes, but your 'rental store' can now be a warehouse in Mexico -- no need for expensive real-estate or US employees. As for putting the right DVD to play -- jukeboxes have been doing that since the '50s, it's not exactly impossible to automate. Keeping the inventory is a problem. But you could probably play an in-demand DVD a dozen times over a weekend, while netflix or blockbuster could only rent it out once or twice.
jarin 16y ago
You'd have to make enough over time (accounting for growth) to make up for the cost of the DVD players (and video capture cards or PCs) and the cost of the DVDs themselves, plus operating costs. I honestly wouldn't be surprised if they're running a few token DVD players and the rest streaming from a server (artificially limiting play count) in the hopes that they can buy time and traffic to work out some kind of deal with the movie companies.
roel_v 16y ago
With a dvd player costing $30 or less retail, it shouldn't be hard to get 500 of them at $15. Hook up some IR remote infrastructure, automated switching of the output signals and you should be ready to serve 500 customers at a time for 25k. (for an order that size or a bit bigger a Chinese outfit may even be willing to wire the IR receiver so that there is a direct control line hanging out of it, ready to be hooked up the control server) He has a very small library says the article, so not even a need to actually switch dvd's; even if he does, two high school kids @ $7.25/hour (or nearshore to Mexico for even cheaper labor) can keep up with switching those 500 machines if he has automated the ejecting and sorting of the newly to insert dvd's (that is even assuming that there are no two customers who want to the same movie, and I think the movie rental is heavily long tail, so half of those machines will probably have the same movie in them for weeks on end). I'd think it's massively scalable. Not enough capacity? Call your Chinese guy and you can double or triple it in two weeks. Or when worse comes to worst, drive around for an afternoon and empty the bargain bins of all Walmarts in the area. So let's say you got labor costs of $1000/day if you keep a couple of spare employees at all times and have them work around the clock. Depreciation of inventory is 250/day (very generous - 50k costs depreciated in a year). Rent a warehouse, buy paper clips, 250 a day. Thing that I'm most uncertain about is bandwidth, let's say 300 a day? (2 gb/movie, 3000 rentals a day (see below), 0.05 cent per gb in bulk) His largest expense is going to be the lawyers, let's say a full time one at full rate, 1000 a day. Total costs 2800 a day. Now let's say he's running at half capacity and at all times, only 1/2 of the players are active (on 2 hour movies). He charges $1 for each movie, way below market rate - premium content here in the EU is 6 euros, about 8 dollars, but let's say he goes for rock bottom prices. That's still $3000 a day, putting him in the black. Including 30k+ a month in legal fees. With every additional sale being 95% profit. If this sticks, which I doubt it will, he's got a good deal. (this assumes 3000 rentals a day. I don't know how much this really is. Netflix has 10 mil subscribers, they claim; let's say each rents out one movie a year. That's 27k a day. So you'd have to be about 10% of Netflix's size to make that).
- Figs 16y ago
  Why even bother having someone to switch DVDs if you can get the players so cheaply? Just assign a disk to a player and treat it as a unit, and don't touch it unless it breaks. You could even wire up the unit to be controlled by software and powered off when no one wants to watch that movie. I suppose it would increase space usage, but it would greatly simplify operations if you don't have to depend on a person to load and unload devices.
  - omh 16y ago
    I imagine that the AV cabling and switches could get pretty expensive with that many players.
    - hugh3 16y ago
      If it takes off, I imagine they'll start building some clever custom hardware. It's not going to be an enormous rack of Sony DVD players with big black cables coming out the back of each.
    - cma 16y ago
      Would it be more expensive than what netflix has to do with physical rentals? No.
- hugh3 16y ago
  Running at half capacity seems rather optimistic. Especially if business is primarily concentrated in the US timezones then there should be a heavy peak load in the evening and not much action in the morning. And if you're regularly overrunning your capacity in the evenings then people are going to get frustrated with your service (imagine going down to the local video store and having them tell you that unfortunately they're completely out of all movies...)
  - roel_v 16y ago
    OK, then add another 250 a day for double the equipment. Now he only needs average occupation of 25% and he's still at break-even, without discounting for the other costs savings that will show up once you start going into that much detail (like only having to have one guy swapping DVD's at night). Like another poster remarked, for $1000 labor a day, with the numbers above, you can get 5 times the amount of dvd players (eliminating labor completely if you have one player for each CD you offer, and I guess you need a help desk...) and still come out to the same numbers. Maybe I'm way off the mark on some of these numbers, I don't know; I'm not familiar with this industry. The 'generic' parts of it are realistic though, I think.

danohuiginn 16y ago

yes, but your 'rental store' can now be a warehouse in Mexico -- no need for expensive real-estate or US employees. As for putting the right DVD to play -- jukeboxes have been doing that since the '50s, it's not exactly impossible to automate. Keeping the inventory is a problem. But you could probably play an in-demand DVD a dozen times over a weekend, while netflix or blockbuster could only rent it out once or twice.

jarin 16y ago

You'd have to make enough over time (accounting for growth) to make up for the cost of the DVD players (and video capture cards or PCs) and the cost of the DVDs themselves, plus operating costs. I honestly wouldn't be surprised if they're running a few token DVD players and the rest streaming from a server (artificially limiting play count) in the hopes that they can buy time and traffic to work out some kind of deal with the movie companies.

roel_v 16y ago

With a dvd player costing $30 or less retail, it shouldn't be hard to get 500 of them at $15. Hook up some IR remote infrastructure, automated switching of the output signals and you should be ready to serve 500 customers at a time for 25k. (for an order that size or a bit bigger a Chinese outfit may even be willing to wire the IR receiver so that there is a direct control line hanging out of it, ready to be hooked up the control server) He has a very small library says the article, so not even a need to actually switch dvd's; even if he does, two high school kids @ $7.25/hour (or nearshore to Mexico for even cheaper labor) can keep up with switching those 500 machines if he has automated the ejecting and sorting of the newly to insert dvd's (that is even assuming that there are no two customers who want to the same movie, and I think the movie rental is heavily long tail, so half of those machines will probably have the same movie in them for weeks on end). I'd think it's massively scalable. Not enough capacity? Call your Chinese guy and you can double or triple it in two weeks. Or when worse comes to worst, drive around for an afternoon and empty the bargain bins of all Walmarts in the area. So let's say you got labor costs of $1000/day if you keep a couple of spare employees at all times and have them work around the clock. Depreciation of inventory is 250/day (very generous - 50k costs depreciated in a year). Rent a warehouse, buy paper clips, 250 a day. Thing that I'm most uncertain about is bandwidth, let's say 300 a day? (2 gb/movie, 3000 rentals a day (see below), 0.05 cent per gb in bulk) His largest expense is going to be the lawyers, let's say a full time one at full rate, 1000 a day. Total costs 2800 a day. Now let's say he's running at half capacity and at all times, only 1/2 of the players are active (on 2 hour movies). He charges $1 for each movie, way below market rate - premium content here in the EU is 6 euros, about 8 dollars, but let's say he goes for rock bottom prices. That's still $3000 a day, putting him in the black. Including 30k+ a month in legal fees. With every additional sale being 95% profit. If this sticks, which I doubt it will, he's got a good deal. (this assumes 3000 rentals a day. I don't know how much this really is. Netflix has 10 mil subscribers, they claim; let's say each rents out one movie a year. That's 27k a day. So you'd have to be about 10% of Netflix's size to make that).

Figs 16y ago
Why even bother having someone to switch DVDs if you can get the players so cheaply? Just assign a disk to a player and treat it as a unit, and don't touch it unless it breaks. You could even wire up the unit to be controlled by software and powered off when no one wants to watch that movie. I suppose it would increase space usage, but it would greatly simplify operations if you don't have to depend on a person to load and unload devices.
- omh 16y ago
  I imagine that the AV cabling and switches could get pretty expensive with that many players.
  - hugh3 16y ago
    If it takes off, I imagine they'll start building some clever custom hardware. It's not going to be an enormous rack of Sony DVD players with big black cables coming out the back of each.
  - cma 16y ago
    Would it be more expensive than what netflix has to do with physical rentals? No.
hugh3 16y ago
Running at half capacity seems rather optimistic. Especially if business is primarily concentrated in the US timezones then there should be a heavy peak load in the evening and not much action in the morning. And if you're regularly overrunning your capacity in the evenings then people are going to get frustrated with your service (imagine going down to the local video store and having them tell you that unfortunately they're completely out of all movies...)
- roel_v 16y ago
  OK, then add another 250 a day for double the equipment. Now he only needs average occupation of 25% and he's still at break-even, without discounting for the other costs savings that will show up once you start going into that much detail (like only having to have one guy swapping DVD's at night). Like another poster remarked, for $1000 labor a day, with the numbers above, you can get 5 times the amount of dvd players (eliminating labor completely if you have one player for each CD you offer, and I guess you need a help desk...) and still come out to the same numbers. Maybe I'm way off the mark on some of these numbers, I don't know; I'm not familiar with this industry. The 'generic' parts of it are realistic though, I think.