Online DVD rental
From Wikipedia, the free encyclopedia
Online DVD rentals allow a person to rent DVDs by mail. Generally, all interaction between the renter and the rental company takes place through the company's website.
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[edit] How it works
Most companies operate on the following model:
- The customer joins the rental service and creates a list of titles.
- DVDs from the list are mailed to the customer.
- The customer watches the DVDs and sends them back.
Most companies will let patrons keep the DVDs for as long as they want; customers are, however, limited to a set number of discs out at any one time. (This is similar to the way that a library may only allow users to sign out a fixed number of books at a time.) Once a disc is returned, another is sent out - except for pre-paid memberships. Some companies or plans may have a limit on the total number of DVDs rented in a month. Memberships are usually billed monthly, and includes postage both ways. Some companies also offer video game rentals.
The best-known company of this type is the American Netflix.
[edit] Types of Plans
Most companies provide variations on five basic types of membership plans:
- "Unlimited"
- These plans, have no maximum on the number of DVDs one can rent, although there is a limit on the number one may have out at any one time (the higher this limit, the higher the monthly charge). Most of the plans at NetFlix, Blockbuster, etc. are of this type. "Unlimited" is something of a misnomer, since one will be limited by the delivery time of the postal service involved, the distance between the customer and the company's warehouse, etc. The company may also take active steps to reduce the number of discs shipped - see the "Throttling" section below.
- "Limited", "Capped", "Monthly maximum"
- These plans have a limit on the number of discs customers may have out at any one time, and also a maximum total of discs that can be rented during each billing period (usually monthly). This provides a cost ceiling for the supplier, and these plans are usually cheaper than unlimited plans. Some plans allow for additional shipments at extra cost once the maximum has been reached. Usually no credit is given if usage is below the maximum, although plans that allow this sort of "carry-over" are not completely unknown[1].
- "Package"
- Instead of each disc being sent and returned independently, a "package" plan sends a certain number of disks together at fixed intervals (often weekly), and one returns all the discs in a single package as well. A common scenario allows for two packages to be outstanding, and subsequent packages ship as a previous one is returned.
- "Individual Rentals", "Pay-as-you-go"
- A plan of this type would allow individual rentals for a fixed fee (perhaps varying by type/age/popularity of the title), with no monthly fee. Since companies rely on the monthly fees of low-volume renters to make up for those whose shipping costs approach or exceed what they are paying, there is little incentive to offer such a plan, and the rental price would likely have to approach or exceed store costs. Still, it would be a useful alternative for occasional or periodic renters who want access to the huge selection of online companies or the advantages of mail rental, yet don't want the fixed monthly cost.
- "Peer to Peer Trading"
- There is also a completely different variant which might be termed "peer-to-peer." Individuals are able to exchange items directly with other consumers, using a company's services to provide matching between customers, mailing envelopes, credit for items traded, etc. Examples include Peerflix and SwapSimple.
[edit] "Throttling"
Given sufficiently speedy mail delivery times, customers on "Unlimited" plans who turn around their discs quickly enough can receive enough shipments in a month that the company's actual cost of delivery exceeds the subscription fee, making the customers unprofitable. Even below this point, higher volume customers are by definition less profitable than customers who receive fewer discs per month. If these customers become too numerous, there are various measures which the rental company can take. One is the so-called "throttling" approach, which received a fair amount of publicity in regards to Netflix (which refers to the practice as a "fairness algorithm"). In this case, high-volume customers may experience a greater likelihood of (slower) shipments from alternate warehouses, and selections from lower in their rental queue. They are also less likely to receive replacement shipments on the same day a disc is received. Similar "fair use" caveats can be found in the Terms and Conditions of leading UK companies such as LoveFilm. In Canada, Zip.ca switched to "Capped" plans (with additional shipping charges for rentals over the cap) in part to avoid implementing "throttling".
On March 2, 2006, Blockbuster announced that their service does not implement throttling.
[edit] Marketplace summaries
This form of DVD rental is closely tied to the mode of delivery. The performance of the postal service in various countries can differ, and delivery times also depend in part on a country's geography. A relatively small, densely populated area such as Great Britain poses different delivery challenges to a large area such as the United States (where the major companies have developed a network of regional distribution centers). There are also country-specific implications of the DVD region coding system, and even studio distribution rights within regions. For these and other reasons online DVD rental companies tend to operate in a single country, and even should a company expand to multiple markets, local delivery infrastructure would be required in most cases, as cross-border shipping is impractical in all but specialty cases. Relative pricing levels may also vary depending on the market, the local wholesale cost of DVD product, etc. Following is a summary of the main English-speaking markets.
[edit] United States
Netflix is the prototype for the entire industry and the dominant company in the U.S., closing out 2005 with over 4 million customers. Blockbuster Video claimed 1 million online customers in August 2005 and expects 2 million by March 2006. Walmart briefly entered the market as well, but withdrew and now has a cross-promotional agreement with Netflix. There are a number of smaller companies, some of which target specific niches - GameZnFlix offers video game rentals as part of their subscription package, for instance, while content-edited ("Family friendly") companies offer films that have been modified in order to appeal to families with more restrictive tastes or values. There are also several online DVD rental companies that specialize in adult movies.
[edit] Canada
The Canadian rental environment is less developed than in the U.S. - the major company (ZIP.ca) is far larger than any rival, but is an order of magnitude smaller than Netflix even taking population differences into account. Netflix had announced plans to expand to Canada in 2005, but has put these on hold, while Blockbuster Video, which has stores in Canada, has not yet made known any intention to enter the Canadian online market.
[edit] United Kingdom
Given the relatively small geographical area and high population density of the UK, online DVD rentals have some differences from in the U.S. There are also a bewildering number of companies, but many are actually separately branded versions of two major companies (Video Island/Screenselect and LoveFilm), which provide the website, fulfillment and support services. In most cases the partner brand is a company with access to a large existing customer base (supermarket chains, newspapers, media companies, etc.) which it can direct to its branded site. Each brand may have slight differences in price, quantity, website features or ancillary benefits, but the actual DVD service will be from the same source.
As well as the two market leaders and their branded "powered by" services, there are Blockbuster, Amazon.co.uk, Moviemine and a host of small and medium-sized providers. In April 2006, LoveFilm and Video Island announced [2] they would be merging, with operations eventually to be conducted under the LoveFilm brand. The two companies, with combined membership of over 400,000, shared an estimated 70% of the online rental market in the UK at the time of the announcement [3].
[edit] Australia
There are several providers in Australia, the most prominent being Quickflix and BigPond Movies (owned by Telstra). Another provider is ReelTime.
[edit] New Zealand
There are 3 online DVD rental companies in New Zealand, all offering flat-rate packages. The three companies, all located in Auckland, are Movieshack, DVD Unlimited, and Fatso. Both Movieshack and Fatso offer FastPost shipping to customers nationwide, while DVD Unlimited ceased to offer this in late 2005.
Movieshack was launched on June 28th, 2004 and introduced the first large commercial online DVD rental system to New Zealand, which was followed 2 weeks later by the launch of Fatso.
All major companies offer similar DVD library sizes and pricing packages. In November 2005, Radio New Zealand conducted an independent review on the current market. Based on website and service, it rated Movieshack as New Zealand's leading service, followed by Fatso, then DVD Unlimited.
Current subscriber bases for all three companies remain undisclosed.
[edit] India
There are several online DVD rental services in India, all running their own delivery systems and logistics. Unlike online DVD rental companies in other countries, online DVD Rental Services in India do not use the postal service as a means of delivery or exchange. India's first online DVD rental service is Clixflix[4], which started in 2004. They were followed by Seventymm[5] and Catchflix[6]. CatchFlix has extended to many cities in India and customer base is growing rapidly. Taking into account the large population of India, the market may be large enough for even more online DVD rental services.
