The rental stores Warner boycott

Many of you will be aware of the current unrest in the rental market. For those that aren't, the basic problem is that Warner have decided to charge rental stores more for rental product which is released on the same day as retail. The obvious example is this week's release of Training Day - it'll cost retail stores around £10 a copy (give or take a couple of pounds) to sell on to the public, whereas the same disc will cost rental stores such as Blockbuster and Choices around £25, with the added restriction that the disc cannot be sold as 'ex-rental' until eight-weeks after release.

Now, the rental stores are less than happy with this and starting with Training Day are boycotting Warner's discs 'in the interests of consumers'. What I want to ask is how this is in our interests?

Let's put this into perspective. A rental store can buy as many copies of Training Day as they want at £25 a shot. These can then be rented out to the public for eight weeks before being sold on for what they cost. Most rental stores allow DVD rentals for one night at a time at around say, £3.50, so for each disc seven rentals is all that's required to offset the initial outlay. It should therefore not be difficult to work out that it will take around a week to recoup the costs of one DVD. After this, everything the rental store makes is profit, augmented by the final income as a result of the ex-rental sale.

I am going to make an assumption that for a popular title when spread over the eight-week rental period, the disc is rented out around 50% of the time (obviously it'll be rented more at the beginning than at the end, if any rental store owners want to correct me on these figures then feel free and I'll adjust this article accordingly). This would therefore equate to 28 rentals of a disc at £3.50, which in turn equates to £98. Add on around £10 for the ex-rental sell on value and we have £108 - a potential profit per copy of around £83 (instead of around £98 at retail DVD prices).

The retail stores buy their discs at around £10 selling the disc on at anything from £11.99 to £15.99 depending on the store and discounts. A potential profit per copy of between £2 and £6.

How does boycotting Training Day help consumers? It's a very good question, and one that I really can't find a suitable answer for. Maybe the rental stores may say that they'll have to charge more to rent out the discs but given the arithmetic above we can see that's not the case. As I see it, this is an attempt by the rental industry to hold on to the quickly disappearing rental windows - although it's hard to feel sympathy for the larger chains.

All of the big chains are taking part in this boycott - but this rental pricing structure is going to have no effect on their profits. Only a few smaller independent stores are boycotting the product - and those that aren't that I have spoken to agree that this is all about the greed of the larger stores.

It'll be interesting to read your thoughts on the situation.

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