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It's hard to compete with free. Online movie rentals cost roughly $2 to $4 apiece. And since pirated versions of most TV shows and movies often show up online without charge, it's not easy to convince people to pay for content, let alone pay a premium for it.
The availability of free, pirated movies hasn't stopped online retailers from gouging customers on digital downloads, though. Prices for online movies and rentals are stubbornly high and firmly fixed -- there aren't a whole lot of bargains or discount players out there. Small wonder that "young consumers" gripe that iTunes is "too expensive;" and it isn't shocking that various regulators are investigating media companies for fixing prices. An average movie download, for example, costs $10 -- that price is fairly standard across most online downloading services. (If you could pay a bit more, you could buy a DVD instead, or you could pay less for a used DVD.) Conventional wisdom is that prices are so uniformly high because the studios aren't willing to budge on their take on sales.
"If you're a studio, you're not going to want to sell your movies for 99 cents each," says Jason Avilio, an analyst with Kaufman Bros. "If you look at what's going on with the new release side, you see [online] rentals for around $3.99. I wouldn't expect that to change a whole lot over the next year or two."
The current prices are particularly rich given the fact that a digital platform is bound to be significantly less expensive to run than a brick-and-mortar retail chain -- the real estate, labor and transportation costs, for example, are essentially nill for downloading services like Amazon or iTunes. So why doesn't that value get passed down to the customer?
Vudu, maker of a $300 streaming movie set-top box, is giving it a shot. The company rolled out a bare-bones 99-cent-per-rental summer promotion. The titles that are available aren't exactly piping hot -- they've got "Animal House," "Dumbo," and "Fisher King," to name a few -- but that's not to say the discounted rate couldn't inspire iTunes, Amazon and others to roll out equally competitive offerings.
Photo: Flickr/Katkreig
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