With $2.7 billion earned worldwide, Avatar became the highest grossing movie ever to hit the big screen. Today, that number will certainly be added to, as Avatar was released on DVD and Blu Ray. Anyone that wants to rent Avatar on DVD will have to visit their local Blockbuster brick and mortar store, add it to their Blockbuster queue, or watch it on Blockbuster On Demand. Are you noticing a similarity in all of your options?
You see, Avatar was produced and released by 20th Century Fox Studios. Fox, along with Sony and Warner Brothers, entered into an agreement with Blockbuster stating that their new DVD releases would be available the same day, only to Blockbuster. Netflix and Redbox would have to wait four full weeks before allowing their customers to rent movies from these three studios, making Blockbuster the only legitimate source for new releases from three major movie studios. Some would say that 28 Days Later has become a real-life horror movie for Netflix and Redbox. So the question here is how many people, Netflix subscribers or not, will sign up with Blockbuster By Mail because they want to rent Avatar, and they want to rent it now?
A few weeks ago Blockbuster released Sherlock Holmes on DVD and Blu Ray and it continues to generate millions in rental revenue while Netflix and Redbox just sit back and relax. On Tuesday, April 27th, Blockbuster will no longer be the one-stop shop for Sherlock Holmes, so the playing field will be evened out. But by then, will the movie be of any real value to Netflix or Redbox? Outside of residual rental revenue from already subscribed customers, the DVD itself poses no real opportunities to expand the Netflix or Redbox clientele. The plot thickens.
Netflix (NFLX) released their Q1 earning report yesterday, citing tremendous growth in just the first three months of 2010. The stock has tripled over the last 18-months, which is amazing considering the lack of growth within the stock market and from January-March, Netflix was able to add 1.2 million new subscribers, bringing their current total to around 13.5 million subscriptions. Until the studios entered into an agreement with Blockbuster to give them exclusive rights to new DVD and Blu Ray releases, it appeared that nothing would stop Netflix in their quest to crush the opposition.
There’s no doubt that Avatar will generate a huge amount of new subscriptions for Blockbuster and they will come from two types of people. Type #1 will be current Netflix subscribers that won’t be happy with waiting a full month for new DVD’s to come to them and decide to switch to Blockbuster By Mail. Type #2 will be people without current subscriptions to any online movie rental company, which to Blockbuster are just as valuable. If you think about it, the main reason anyone would sign up for online movie rentals is because they have at least one movie in mind they want to see right now. No one signs up for Blockbuster By Mail and says “I’ll get to my queue next month”, they go right to the available list and start plucking movies out, one by one.
Even if Avatar isn’t the DVD and Blu Ray hit people are expecting it to be, primarily because the movie will now be in 2-D, that still works in Blockbusters favor! For the first four weeks, consumers will rent the movie, watch it, talk about it and if the buzz isn’t good because of the lack of special features, Blockbuster won’t care. According to Warner Brothers, as reported in this Motley Fool article, 75% of DVD sales of new titles occur within the first four weeks after release. By then, Blockbuster will have already generated massive amounts of revenue from everyone that wanted to see it first and by the time Netflix and Redbox get their hands on it, the movie will be of little value.
Unless Fox, Sony and Warner Brothers stop making movies, the Blockbuster subscription list will vastly improve with every new release they offer. Somebody like me, that currently has a Netflix subscription and doesn’t have a Blockbuster subscription, will find a movie that they weren’t able to see in theaters. Then, when that movie comes out on DVD and Blu Ray and it’s only available at Blockbuster, the switch from Netflix will have to be made. While Avatar in 2-D is not that movie for me, it’s only a matter of time before I cancel my Netflix subscription and hop on-board the Blockbuster revival train.
If you’re the type of renter that doesn’t mind waiting a month for new DVD’s to become available, check out the Netflix 1 Month free trial offer.