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First sale doctrine protects your right to rent out a copy that you own to one person at a time. Since movies are in high demand when they first come out and th

First sale doctrine protects your right to rent out a copy that you own to one person at a time. Since movies are in high demand when they first come out and the demand tapers off quickly, this alone doesn't create a very appealing economic model for rentals. At $20 per DVD it's hard to make back your cost. So the studios have offered rental outlets deals in the past. I actually don't know the details of Redbox. The specific example I remember is Blockbuster video, which used to get copies of movies for virtually free, in exchange for sharing a portion of their profits with the studios: https://www.quora.com/How-much-do-movie-rental-stores-e-g-Blockbuster-company-pay-for-each-movie https://www.quora.com/How-much-do-movie-rental-stores-e-g-Bl... I think the studios agreed to this because of market segmentation, for any given movie there are people who have no interest in paying $20 to own it, but will pay a few bucks to rent it once or twice. If the studios didn't support this model they'd be leaving money on the table.

Thorrez 7y ago
It makes sense that rental stores would get cheap copies if they're also doing profit sharing. But it's unclear to me who's getting a better deal there compared to the rental place just buying at normal price and keeping all profits.
- apatters 7y ago
  I just remember reading (or hearing) that it was a tough business because demand for new releases was very high, and then tapered off quickly. So a lot of DVDs would only get rented out 2-3 times and then would never be needed again, if you're paying $20 per DVD it's tough to come out ahead. It's all ancient history at this point so my memory is fuzzy, but I think hobbyist stores actually had the better business model by that measure (they'd focus on a limited selection of classics that people would rent again and again). Then Blockbuster came along with these studio deals they were able to negotiate based on their volume, allowing them to offer practically unlimited copies of new releases. In conjunction with a decent selection of classics this enabled them to lure customers away from the hobbyists. A combination of pressure from the studios and the emergence of competitors with lower operating cost (Redbox, Netflix etc.) later crushed Blockbuster. And watching the studios raise their fees until Blockbuster collapsed surely contributed to Netflix's decision to produce a lot of original content. And now we're caught up to the present day.

Thorrez 7y ago

It makes sense that rental stores would get cheap copies if they're also doing profit sharing. But it's unclear to me who's getting a better deal there compared to the rental place just buying at normal price and keeping all profits.

apatters 7y ago
I just remember reading (or hearing) that it was a tough business because demand for new releases was very high, and then tapered off quickly. So a lot of DVDs would only get rented out 2-3 times and then would never be needed again, if you're paying $20 per DVD it's tough to come out ahead. It's all ancient history at this point so my memory is fuzzy, but I think hobbyist stores actually had the better business model by that measure (they'd focus on a limited selection of classics that people would rent again and again). Then Blockbuster came along with these studio deals they were able to negotiate based on their volume, allowing them to offer practically unlimited copies of new releases. In conjunction with a decent selection of classics this enabled them to lure customers away from the hobbyists. A combination of pressure from the studios and the emergence of competitors with lower operating cost (Redbox, Netflix etc.) later crushed Blockbuster. And watching the studios raise their fees until Blockbuster collapsed surely contributed to Netflix's decision to produce a lot of original content. And now we're caught up to the present day.