Movie Rental Licensing

August 12, 2009 6:20 AM

How does Licensing work for DVD rental Outfits?

Basically, do places like Blockbuster, Netflix, or Redbox pay a licensing fee for the DVDs they rent? After reading the recent article about the studios not playing nice with RedBox, I am curious how it works. DO the businesses pay a flat fee for the right to rent movies? Do they not have to license stuff, and just buy DVDs like a standard consumer? I have to believe the movie industry must have some way of getting an extra cut from this.

posted by Amby72 to media & arts (7 comments total)

From an article about the Redbox suit:

The company does not, however, have any sort of partnership with most of the major movie studios. Sony is the only one that has recently struck a distribution deal with Redbox—the company otherwise obtains its DVDs through wholesale movie suppliers, such as Ingram and VPD, that have contracts with the movie studios. Movie giant Universal was the first to pick a bone with this arrangement, threatening to sever contracts with distributors unless they stopped providing DVDs to Redbox until 45 days after release.

And here are some details on their Sony deal:

The deal allows Redbox, a unit of Bellevue, Wash.-Coinstar Inc., to purchase titles directly from Sony Pictures at a lower price than what it would get through a wholesaler, such as VPD Inc. or Ingram Entertainment Inc. In exchange, Redbox has agreed to conditions such as not selling used Sony DVDs into the marketplace, which could erode pricing.

posted by smackfu at 6:47 AM on August 12

There's a legal construct called the First Sale Doctrine (IANAL) that basically says "You bought an object, you can do whatever the heck you want with it." For physical things, that means you really can just buy it and rent it out without paying anybody anything extra. Most rental companies buy at a discount in bulk, but there's nothing stopping them from just picking up a lot of copies at retail and still renting them; I believe Netflix did, or said they would, during a distribution brouhaha. There's no licensing involved.

This is, of course, what the media giants would like to change when everything goes digital, so they always get a cut from everything that ever happens with their IP. But right now, no, they don't get any extra cut, because you don't need a license to rent a physical object.
posted by Tomorrowful at 7:14 AM on August 12

There's a legal construct called the First Sale Doctrine (IANAL) that basically says "You bought an object, you can do whatever the heck you want with it." For physical things, that means you really can just buy it and rent it out without paying anybody anything extra.

There's also copyright law of 1984 which removes this ability for phono records and computer software.

Which is sad, since renting $600 worth of CDs -- the entire catalog of my favorite J-POP artist -- for $40 back in 1999 was one of my favorite experiences in Tokyo :)
posted by @troy at 7:21 AM on August 12

Back in the VHS days, I remember "for rental" videos being sold at something like $80 a pop. I think those would go on sale a few weeks before regular retail sales. If you really wanted to buy it for the rental price you could, but obviously it was more for Blockbuster and stuff.
posted by kmz at 7:23 AM on August 12

So, The movie studios have not figured out how to get in on the sweet deal of "Licensing" movies like the software industry and Music Industry does? It seems things are moving this way in the digital distribution channels. I guess I always thought they had to buy expensive copies of the movies or pay some sort of licensing fees.
posted by Amby72 at 7:49 AM on August 12

The Weinstein Company tried this with Blockbuster some time ago

Curiously, I'm seeing some of their films expiring from netflix's instant view at the end of the month. Dunno what's up with this.

I think netflix and others do revenue sharing with the majors to more fully optimize their supply/demand curves (by managing their inventory with non-retail product). Lots of DVDs I get from netflix are non-retail (going by the monochrome disc labelling).
posted by @troy at 9:56 AM on August 12

I have a similar memory to what kmz said. I worked at a BlockBuster in the late 90s. It was standard procedure for us to call people who had a movie a month overdue and inform them that in a week we'd be selling it to them, charging it to the credit card we had on record, unless they returned it. A lot of times we suspected folks thought this was a reasonable exchange and would just keep the movies. Unless it turned out to be a brand new movie (which I guess we got for a premium before they went onsale to the masses at regular prices?) and when a $99 charge for a VHS movie showed up on their credit cards, the "lost" movies quickly got found.
posted by jermsplan at 10:06 AM on August 12