Les Bonnes Choses

I was reading this article on the Globe and Mail this morning to give my eyes something to do as I drank my tea. In it, Warner Bros explains their rationale for withholding new releases from rental companies: they want to provide an incentive for buying the damn things. Their understanding of purchasing behaviour has lead them to conclude that some segment of the population wants very much to see a new release immediately. The only reason they don't satisfy this need by purchasing the movie, WB logic goes, is that the movie is also available as a rental. $5 rental versus $25 purchase? No brainer. By withholding rentals for 28 days, that market segment will be forced to purchase the movie rather than rent it.

Nevermind the obvious workaround that Netflix took, which was to just buy the damn movie at BestBuy -- no doubt a calculated risk as the extra cost of the retail disk might be offset by additional subscriptions gained by being the only rental company providing these new releases. This market segment -- the one comprised of movie aficionados -- let's imagine they're a sizable lot and worth fighting over. The problem is, they're cheap by definition. It's built in to WB's basic assumptions behind their decision to withhold providing rental disks: the only reason they'd buy the movie is that it's not available for rent at a lower price. Now take away the option to rent. Know what's even cheaper than renting? So does this market segment. In fact, if this group so highly values getting a movie the day it's released, imagine how they feel about having a movie the week before it's released.

Well played, WB. I'm going to put a sell rating on Time-Warner (TWX:New York). I'm also going to suggest that its board members get the hell out of the 1% because they clearly have not earned it.