Low-cost DVD movie rentals are taking a bite out of Hollywood’s economy, according to a new study released Monday by the Los Angeles County Economic Development Corporation (LAEDC).
The study, titled “The Economic Implications of Low Cost DVD Rentals,” used the Redbox model of $1 DVD rentals from vending machines.
It estimates that low-cost rentals of new movies could result in $1 billion of lost revenue to the domestic home video industry in the L.A area, the loss of 9,280 jobs in the entertainment industry and an additional $500 million in reduced economic activity.
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"The economics of the motion picture industry are based on exclusive release windows which allow price differentiation, that is, some earlier transactions take place at higher price points," said Gregory Freeman, vice president of Consulting and Economic Policy for the LAEDC.
"Redbox, or any other distributor that weakens the release window model, could reduce overall industry revenues. Lower revenues will likely lead to lower production activity, hurting the Southern California economy."