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Late
Fees
Explode at Video Stores!
The
millions of dollars Virginians pay for late
charges could spur a lot of competition, from
video on demand to high-definition television on PBS.
The
lead on one of those PR Newswire releases
available online was eye-catching: “Hampton
Roads residents are paying more than $7 million in
video rental late fees, according to Video Store
Magazine.”
Seven
million dollars are paid in late fees for video
rentals each year in a population of about 1.5
million? That’s about $4.67 for every man, woman
and child. Projected over the Commonwealth’s
population of seven million, that number implies
that Virginians pay $32.7 million annually in
video rental late fees. Talk about a hidden tax!
That
kind of money must be extremely valuable to video
rental stores.
“The
industry trade magazine also finds that late fees
account for 12 per cent of video store rentals,”
the release continued. So, late fees turn out to
be more profitable than any one blockbuster hit or
group of hits a video rental store may stock. More
importantly, therein lies the business proposition
that is driving cable television companies into
the video-on-demand marketplace.
Thirty-three
million dollars annually could buy a lot of video
on demand (VOD) in Virginia. Think coast-to-coast. Using Census Bureau
figures, the 293 million residents in the
United States
could be wasting $1.37 billion on late fees for
video rentals each year. And since the U.S.
gets a net gain of one person every 13 seconds,
another $32 has been wasted since you started
reading this commentary!
The
media release, it turns out, was a joint effort of
Cox Communications and its In Demand
partner. Cox Communications serves cable customers
not only in Hampton Roads, but in Fairfax
County, Roanoke
and Fredericksburg. But a similar release could have been put out by
Comcast Cable for any of its Alexandria, Arlington, Prince William, Richmond,
Glen Allen,
Midlothian
or other Virginia
customers, or by any other cable provider.
Conversion
of cable systems to digital service has opened the
door to video that can be provided 24/7 with no
travel, no waiting and no late fees. No movie is
ever sold out. Price VOD at $3.95 for each movie
and the total savings in time and treasure can be
significant. Is that really why Viacom is planning
to spin off Blockbuster in July? And what happens
to those prepackaged cable movie networks at
$13.95 each a month?
Then
there is Netflix, the online DVD rental service,
that has grown to over two million members by
charging $19.99 a month to let home entertainment
center consumers order online and receive and
return DVDs by mail. Feeling the profit heat,
Netflix is raising its price to $21.99 per month.
Netflix may turn out to have been a gap filler,
but it may survive as a niche solution. And the
word is out that Blockbuster will launch a new
$24.99 in-store subscription service, maybe even a
DVD trading service, sometime later this year.
Theologians
might explain that the market works in mysterious
ways. But equally of note is the news that a
leading Virginia
media enterprise is using its decades-long
leadership in television technology to become the
most trusted institution in America. Alexandria-based PBS, which is a private,
non-profit owned and operated by the nation’s
349 public television stations, has become the
first broadcaster to provide a fully equipped 24/7
channel consisting entirely of High Definition and
Widescreen content.
The
PBS HD Channel, according to its own media
release, is available from local PBS stations that
have transitioned to digital broadcasting and
through digital cable systems that have agreed to
retransmit the digital signal of those stations.
PBS already had a VOD cable package, “PBS KIDS
on Demand” among its digital offerings.
Equally
intriguing is to see the results of the national
opinion study of 1,000 adults done for PBS by
RoperASW in December and January. On a list of
nationally known organizations, 50 percent of
respondents said they trusted PBS a great deal.
Courts of law turned out to be a distant second at
28 percent. State legislatures at budget time were
not on the list.
40
percent also said they trusted PBS a great deal
for news and public affairs. CNN was second at 33
percent. 59 percent said having PBS was very
important. Commercial broadcasting at 40 percent
and cable networks at 36 percent were very
important to fewer respondents.
But
a big question remains. Even with HD showcasing of
Nature, Nova, Great Performances
and ExxonMobile Masterpiece Theater, will
PBS get some of the $32.7 million Virginians could
put back on the table by return their video
rentals on time? More importantly, does this
Virginia-based media enterprise have a strategy
for tapping into that $1.37 billion that could
become available nationwide?
History
is not reassuring on that score. Seventy-nine
percent of Americans believe that funding given
PBS from governments, corporations and individuals
is “money well spent.” But it was the cable
industry, not PBS, that perfected the subscription
model while public television clung to the
contribution model.
Maybe
interactive digital service will allow software to
end the local pledge program interruptions once a
viewer makes his contribution contribution to
public television. Call it “no video where there
is no demand” (NVND) and consider it a winner.
Then Virginians, like Americans everywhere, can
get on to the next challenge: What do we do with all
the empty storefronts that once were video rental
stores?
April
26, 2004
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