The UK DVD Rental Industry

The UK DVD Rental Industry and it's effect on Healthy Cooking

The UK DVD rental industry was dominated by physical organisations until 2004, with various rental outlets all over the country. However, 2004 saw the market increase of online rentals which, according to Screen Digest, are expected to account for over one third of all UK DVD rentals by 2009. Virtual organisations are rapidly increasing their share of the total rental market and have began to threaten the sales of leading physical organisations (figure 2.1), as they often offer extensive catalogues and monthly rental packages.

In 2002, DVD became the dominant format in the rental market and has since continued to increase its share, to account for an estimated 95% of all retail and rental sales in the UK in 2005. DVD formats are lighter than older VHS formats and therefore cheaper and easier to exchange by mail; this has been a significant factor in allowing virtual companies to cost-effectively supply the market.

However, the UK DVD rental industry is declining; DVD sales plummeted from 3.87million units per week in February 2005 to 2.6million per week a year later (Media Research and Information Bureau).This reduction has been attributed to the closure of 238 independent high street rental stores, which have experienced increasing competition from the Internet and since film studios eliminated the "rental window", making DVDs now available for purchase on the same day as they are available for rent. Furthermore due to the price deflation of DVDs, the price-gap between renting and buying is no longer larger enough in consumer's minds to outweigh the benefits of ownership.

Further challenges include the precarious demand structure for physical rental stores. Industry statistics indicate that nearly 50% of physical stores revenues come from the top 25 new releases in a year. This creates the problem of a huge surplus in supply of new films, once the initial demand fades.