retail news in context, analysis with attitude

by Kevin Coupe

There is a scene in Pirates of the Caribbean: Curse of the Black Pearl in which Johnny Depp’s Captain Jack Sparrow defeats Will Turner (Orlando Bloom) in a sword fight, and Turner says, “You;’d never beat me in a fair fight.”

To which Captain Jack responds, “Hardly an incentive for me to fight fair.”

Such is the case with the new film rental service Zediva, which is trying to challenge Netflix and Redbox - which themselves have made Blockbuster virtually irrelevant - by playing the game in its own way.

According to the Hollywood Reporter, “Zediva, which just went live to a broader audience after a year-long beta trial with what it says were a few thousand beta users, allows users to watch movies, which are newly released on DVD, via the Internet - on computers and select Internet-connected TVs, Blu-ray players and other devices - without the delays of other services.”

The story goes on: “The company’s operation depends on a data center full of DVD players that play the movies ordered on its site. Users control playback via the site and get DVD functionality, including subtitles and the like ... The company's use of physical DVDs and DVD players in the Silicon Valley appears to be at the core of Zediva's argument that it is working within the copyright rules of the so-called first sale doctrine, which applies to DVDs, but not streaming content. That doctrine allows a purchaser to sell or lend a lawful copy of a copyrighted work without permission once it has been obtained ... The low price point ($1.99 per rental, $10 for a package of 10) is possible because the company looks for a high enough number of rentals to bring in enough revenue to turn a profit, according to the CEO. Plus, since users of the online service don't need to physically return DVDs like in the case of Redbox, the company sell more rentals per day.”

Traditional streaming services have signed distribution agreements with Hollywood studios that are designed to delay availability in a way that protects DVD sales numbers, which have been waning in recent years. But Zediva, up to this point, seems to not be playing fair, or at least not by the other guys’ rules ... though it certainly is possible that there could be a lawsuit challenging its approach.

But this is a good example of how all retailers need to approach their businesses - not just identifying opportunities, but looking for the places in which they can change the rules and not fight fair, and in doing so give themselves a differential advantage. It is an ongoing process - there is no end game here - but it is an approach that actually can give a business some measure of sustainability.

And that’s our Wednesday Eye-Opener.
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