$1 DVD rentals costing biz $1 bil: study

Falling home video revenue is decreasing jobs, film prod'n

A regional economic group estimates that dollar DVD rentals from Redbox and others has cost the entertainment industry $1 billion and that the "ripple effect" will cost hundreds of millions more.

The Los Angeles County Economic Development Corp. study said the nationwide declines in home video revenue will cause an additional $500 million in losses as more than 9,000 related job cuts wipe out almost $400 million in wages, primarily in Southern California. The dramatic assessment comes amid growing popularity among recession-wracked consumers of ultracheap disc rentals offered by Redbox and other DVD-kiosk chains.

Three Hollywood studios -- which number among businesses supporting the nonprofit LAEDC -- are engaged in a court battle with Redbox over their efforts to prevent DVD releases from finding their way into Redbox kiosks. Redbox has sued Universal, Fox and Warner Bros. over what it calls antitrust violations.

The LAEDC said a decline in DVD-rental income caused by the dollar-rentals trend will lead to a decline in film production. That, in turn, would prompt job cuts and other economic fallout.

The economic group projects a reduction in contributions to the health and welfare funds of entertainment industry labor groups and a $30 million slide in state, county and local tax revenue.

LAEDC vp Gregory Freeman, who wrote the report, said Redbox's low pricing amounts to failure to recognize traditional price points on new releases.

"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," Freeman said. "Redbox, or any other distributor that weakens the release-window model, could reduce overall industry revenue. Lower revenue will likely lead to lower production activity, hurting the Southern California economy."

The study, titled "The Economic Implications of Low Cost DVD Rentals," was suggested by an unspecified labor organization serving below-the-line workers. The guild, which requested anonymity, paid about $20,000 to fund the work, Freeman said.

The LAEDC based its estimates on comparisons of recent DVD revenue projections by independent industry analysts during the period in which dollar rentals have risen. Freeman said researchers found a clear correlation between a decline in projected revenue and a forecasted growth in market share by kiosks companies such as Redbox.

Redbox chief Mitch Lowe said the company's own research shows a positive impact on Hollywood from consumers' burgeoning love affair with dollar rentals.

"Redbox is an engine for industry growth, increasing consumer interest in film and providing new revenue streams to studios," Lowe said.

The Redbox chief cited "problematic data resulting in flawed analysis" by the LAEDC.

Meanwhile, Freeman said his group's ties to Hollywood had no bearing on its study.

"The interest of the LAEDC, when it comes to this sort of issue, is simple: What's the jobs impact?" he said. "Given that one our top industries in Southern California is the entertainment industry, anything that has an impact on that is something we're going to be interested in."