Blockbuster UK has lowered the overnight rental price of selected films on DVD and Blu-ray to £0.99 ($1.58) throughout the company's 600-strong UK store base. Blockbuster UK (a separate legal entity from its US parent whose stores were recently acquired by Dish Networks) began the initiative in November 2011 focusing on recent catalogue titles such as as
Harry Potter and the Deathly Hallows - Part 1, Meet The Fockers and Tron: Legacy. The offer, which also includes selected five-night console game rentals for £5, is available through the company's Click & Collect service which allows customers to reserve titles online and via mobile phones for collection in-store. According to IHS Screen Digest analysis, the average price of a DVD or BD rental in the UK was £2.89 in 2010.
Analysis
The titles included in Blockbuster's new initiative are not high-turn new releases and as such are unlikely to still be being rented in any volume by regular renters. However, they remain recent enough to lure casual renters and consumers who may have missed them during their theatrical release. As well as generating rental revenue, albeit at a low level, for product that might otherwise be sitting on shelves, Blockbuster is no doubt hoping that the offer will help draw some UK consumers back into the video rental habit.
One reason for such optimism is the fact that the US rental market is on track for minimal growth this year following the best part of a decade of declining spending. A key driver for this reversal has been the huge expansion in the past five years of low-priced rental kiosks. At launch the kiosks' USP was their $1-per-night rental rate (subsequently raised) at a time when the market average was more than $3 and consumers were increasingly keen to cut costs.
However, IHS Screen Digest doesn't believe that Blockbuster's 99p offer will have the same impact in the UK. In addition to being cheap, the kiosks are hugely convenient, with market leader Redbox (part of Coinstar) now operating in almost 30,000 US locations. Furthermore, US consumers generally spend more on home entertainment than consumers in the UK - IHS Screen Digest research shows that the average American will spend almost $400 on film and TV this year, compared with a little over $250 for the average Brit.
Despite the growth of online subscription DVD/BD rental services, notably LoveFilm (now part of Amazon), physical rental has effectively become a niche activity in the UK - and in Europe in general. The average US or Japanese DVD household rents at least 20 times a year; the equivalent figure in the UK is only 2 to 3 times a year. As a result, rental will account for just 10% of UK consumer spending on physical video in 2011 compared with 41% and 53% in the USA and Japan respectively. This limits the audience for Blockbuster's offer in the UK and means that the greatest impact of the initiative may be to further increase the company's market share at the expense of the few remaining independent rental stores whose customer catchment area overlaps with that of a Blockbuster store. The gamble for Blockbuster is that the offer will drive sufficient incremental transactions - and sales of ice cream, soft drinks and sweets - to offset the inevitable cannibalisation of higher priced catalogue rentals by existing customers.
Find Out More > IHS Screen Digest Video Intelligence