How much of a ticket price does a movie make from a ticket purchase?
How much does it make if I rent it at Blockbuster?
How much does it make if I simply add it to my flat-rate membership to Netflix?
I can answer the first question, but not the others.
On average, the answer is 50%. In the first few weeks of release, a major film may command 90% or more. (I recently heard from a film buyer that some blockbusters can now command more than 100% in the opening week!) But as time goes by the rental rate drops, and over the long haul theaters turn about half of the gross over to the studios.
As for Blockbuster or Netflix, the movie company takes their cut from the sale of the DVD to Blockbuster or Netflix. They do not make money directly on each rental. All the rental money goes to Blockbuster/Netflix (though they do have to buy the DVD).
Thus, if Blockbuster pays $20 for a DVD, the studio gets a flat percentage of that $20, the same amount they’d get if you bought the DVD yourself for $20. Blockbuster keeps all rental fees.
I’d guess the studios cut would be from 25%-50% of the retail price, depending on from where it’s purchased.
But I presume that Blockbuster (et al) has to pay more for their DVD’s than I do. The ones I buy have a whole bunch of warnings at the beginning telling me that they’re only for private viewing, can’t be rented, need permission of the copyright holder if I want to let my cat watch it with me, etc. Since buying a DVD for public rental would violate most of those terms, I assume that the video stores must have some sort of agreement with the studios that allow them to rent the videos, and that they pay more for that privilege (either per-DVD or in some sort of a one-time or recurring license fee). Anyone know?
Netflix and Blockbuster have licensing deals with many (most?) of the studios where they get the DVDs for free in exchange for a licensing fee. Ten years ago, this was typically in exchange for 40% of the revenue that disc generated. Now, it’s generally for a flat fee.
But Reality Chuck is right, in that the money you pay netflix doesn’t go directly to the studio when you rent a movie. It’s not a 1-to-1 relationship, as it is with ticket sales. But the studios do make money from those rentals in the aggregate. According to a New York Times article last summer, they get an average of $2.25 for every DVD rented. (That’s per disc, not per rental).
But in the aggregate, most movies make more than half of their total revenues from DVD sales and rentals. In ten years, I’d wager that the majority of a film’s revenue comes from digital downloads or other on demand viewing. Theatre tickets are never going to be the main moneymakers.
Renting out a movie does not violate those terms. Those warnings cover the viewing and display of the movie, not any transfer of the disk itself. The warning says that it’s licensed for private home viewing, only. That means that you can’t have 50 people come watch it and charge them a buck each (or try to sell them beer or something). It doesn’t mean that you can’t rent it to someone else to watch, at home, in private.
IANAL, but here’s what I understand of why the studios can’t control rental. Under the First Sale doctrine, once you buy an item like a book or movie (in tangible form), you can resell it, and the original owner doesn’t have any claim on it. A rental could easily be structured as two sales. First, the rental store sells you the movie, then later, you sell it back to them. The restrictions on viewing and display are written into the law specifically, which is why they can control that.
The studios used to get more money on tapes for rental because tapes were priced differently during the first few months of release. That pretty much stopped when DVDs came out. Even then, though, there was no legal barrier to a rental place waiting 6 months and buying the tapes cheaper, then renting those out.
anson, do you have a cite for the licensing deals that Blockbuster/Netflix have? I don’t disbelieve you, I’ve just never heard any specifics. I do remember a while ago some production company (Weinstein?) announcing that they were establishing an “exclusive” rental deal with Blockbuster, which really made me scratch my head. How could they prevent Netflix from just buying a bunch of DVDs and renting them out?
You’re generally right, iamthewalrus(:3=, but the First Sale doctrine means you can do anything you wish with the object (i.e., the actual DVD) other than make copies and show in public.
The actual object is yours and can be treated like any piece of property – your electric screwdriver, for instance. You can sell, lend, or even rent it out.
Copyright only applies to making copies. No copies are made when a DVD is rented.
Back in my college days, I worked at a movie theater. This was right around the time Pretty Woman came out.
At that theater, 95% of the ticket sales opening week went to the film studio. It’s the money they use to recoup the cost of making the movie. Each week after that, the percentage dropped by 5%. So week 2, the movie theater got 10% of the ticket sales, 15% week 3, and so on.
This was important for Pretty Woman because the movie had a slow opening, and word of mouth built ticket sales in a big way over several weeks. The movie became a monster hit, but by that time a large chunk of the ticket sales were going to the exhibiting theaters. Better for the theater operators, worse for the studio.
Heck, we showed Kevin Costner’s Dancing with Wolves for LITERALLY 6 months! And had reasonably sized audiences even at the very end. I wasn’t sure why they stopped showing it at all.
PS – because MOST movies open big and taper off from there, the theaters make the bulk of their income from food and drink sales. Hence, 18 for a bucket of popcorn that costs .03/silo.
Can’t wait to see what corn ethanol use does to movie popcorn prices…
They can’t, but they can force Netflix to buy the DVDs at retail prices, while giving them to Blockbuster for free. They can also deliver them to Blockbuster weeks or months before they’re available for sale on the open market. Weinstein gets a percentage of revenue with guaranteed minimums, not to mention increased in-store and online promotion.
As far as cites on revenue sharing as part of the business model, here’s one.
Ah, that makes sense, anson. Thanks for the info.
I never meant to imply that the First Sale doctrine only gave you the right to resell. But I knew it gave you that right, and that right would be enough to have a rental business.
So is there nothing that would prevent me from starting a business renting out PC games?
No, that’s a different creature altogether. PC games have to be installed, which involves making a copy to each individual hard drive. Console games and DVDs can be used without ever being copied.