Film Lease Per Diem - Movie Rentals

It’s Friday night and you are ready to go hit the town with your friends.  Catch a movie, catch some grub, or maybe go to a club.  Unfortunately, all the restaurants in town had kitchen fires on the same night and had to close.  Then, all the clubs were shut down due to fire code violations.  Finally, the projectors in every movie theater in town all broke down on the same night.  You can’t afford gas to go to the next town, so you and your friends have one option left.  Time to rent a movie!

Movie rentals were first available to owners of the Avco Cartrivision in 1972.  Owners of what was basically an early TV-VCR combo could order movies for rental at a retailer, have them delivered to their house through the mail, and then take them back to the retailer when they were finished.  The Cartrivision itself was quite expensive and obviously didn’t lead to a mass market revolution, but it is interesting to note the similarities of this service to modern services such as Netflix. 

Movie rentals grew in popularity in the late 1970s and became a fixture of daily life for many by the 1980s.  People could go by a local rental shop and pick up a videocassette of a movie to watch whenever they wanted to.  There were late fees if they didn’t return the movie on time, basically to make up for any potential loss of profit caused by a movie being unavailable to the next customer.  In general when movies were first released to videocassette they were “priced to rent,” meaning that they cost $100 or more to buy, at least for the first few months.  Anyone wanting to catch the latest releases would have to rent it first and buy it later when the price went down.  This practice gradually changed and disappeared completely when DVDs were brought to the market.

Nevertheless, the basic business plan of movie rental shops remained unchanged until the introduction of Netflix, which allowed consumers to keep a certain number of movies at home at a time for a monthly fee.  Consumers could order movies online, receive them in the mail, and keep them as long as they wanted without any late fees.  This model was imitated by major players in the industry such as Blockbuster when Netflix proved to be fierce competition to the old business model. 

In addition to Netflix, other online rental services have cropped up, notably services which allow users to download a movie and view it one time for a small fee.  Once the movie has been viewed, the downloaded file is no longer viewable.  This model is being used by the popular music/video service iTunes as well as several others elsewhere on the internet.  There is no doubt that the movie rental industry will continue to change as technology and entrepreneurship lead to a greater variety of options for consumers everywhere.