Study Being Promoted As 'Redbox Kills Jobs' Actually Shows That Hollywood Jobs Will Grow

from the not-what-they-said... dept

Wed, Dec 9th 2009 9:49am — Mike Masnick

We've already been covering Redbox's legal fight with a few movie studios who so hate the idea that Redbox is actually giving people something they want (legally) at a reasonable price (legally), that they want to kill it. The whole thing is so ridiculous that it's difficult to believe there's anyone out there defending the anti-Redbox studios' position (and, in fact, a couple of the other studios, with Paramount in the lead, have realized that it's smarter to partner with Redbox than to try to kill it). Yet, the Los Angeles Economic Development Corporation (a non-profit with LA government connections) has put out a report claiming that Redbox kills jobs and harms the economy throughout Los Angeles (thanks to reader Valkor for sending this in). If you want, you can read the full report (pdf) -- but prepare to be amazed as what the report actually says is quite different than the press release headline.

Hidden within the report are claims that the industry will continue to grow nicely for the next decade and that alternative business models will develop that more than compensate for any loss of revenue from reduced rental prices. But that's not what the headline of the press release says. No, it reads:

Study says low-cost DVD rentals could lead to $1 billion, 9,280 jobs lost

But, deep in the actual report? Why, it says the following:

The shift to digital delivery will provide new revenue streams for the industry and new opportunities... Increased availability of all types of digital content and media have changed lifestyles and will continue to contribute to demand for video products. Indeed, SNL Kagan forecasts continuing growth in overall industry revenues as alternative streams compensate for this loss of revenue. In total, SNL Kagan projects an increase in distributor revenues from all sources worldwide from $51.3 billion in 2008 to $67.6 billion in 2017. While the composition of these revenues will clearly change, distributors will continue to experience revenue growth into the next decade.

So how does it get from that to the headline? Well, it assumes that Redbox is decreasing revenue from traditional rental, and seems to assume that these other alternative revenue streams are not influenced by Redbox or other forms of distribution that are more convenient and cheaper and attract a new or different audience -- which seems like a dubious assumption. Another way of looking at this: it's as if the horse and buggy industry put out a report just as automobiles were coming to market that said, yes, the auto industry will be huge and will create millions of new jobs, but because a much smaller number of jobs are lost due to downsizing the carriage market, we can release a report saying that the auto industry is "killing jobs." Logically, that's ridiculous.

On top of that, it makes some odd assumptions throughout the report, continually throwing out the idea that Redbox itself might increase the revenue for the industry, repeatedly suggesting that the industry is mature and if there were a way to get more revenue out of it, it would have already been discovered. Of course, considering that the market has long been dominated by a single player, not prone to innovating, and with close ties to studios that have limited some of how it could act -- that assumption is highly suspect. In fact, the very reason that Redbox has been so popular (and which also explains the rise of Netflix) has been consumer dissatisfaction with the old Blockbuster model, which was designed to squeeze consumers.

To the authors' credit, they do try to be fair on other numbers and assumptions, recognizing that effects go in multiple directions and that there are other issues at play, but the press release headline claiming that Redbox costs the industry a billion dollars and nearly 10,000 jobs, when the actual report claims that revenue is increasing and will continue to do so, just seems hard to swallow. Unfortunately, every single press report covering this study seems to only take the PR headline from the report and repeat it, without anyone appearing to have read the part of the report that says the exact opposite of what the headline claims.

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Filed Under: dvds, hollywood, jobs, los angeles, predictions, rentals, ripple effects
Companies: laedc, los angeles economic development corporation, redbox

25 Comments

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senshikaze (profile), 9 Dec 2009 @ 9:44am

let me guess:
the headline was done by an industry shill while the paper was done by a relatively unbiased team?
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- Anonymous Poster, 9 Dec 2009 @ 10:02am
  
  Re:
  Like that's a surprise at this point.
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- Mike Masnick (profile), 9 Dec 2009 @ 10:07am
  
  Re:
  the headline was done by an industry shill while the paper was done by a relatively unbiased team?
  
  No, the paper itself has lots of problems. They definitely keep trying to steer the paper back to the claims made by the headline. But, on the whole, they at least seem upfront about stuff. They just keep making assumptions (highly questionable ones) to try to support the claim of job losses, even though they really show job growth.
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Consumer, 9 Dec 2009 @ 10:04am

I'm shocked and dismayed
How dare Redbox provide their service at a reasonable price.
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- Brendan (profile), 9 Dec 2009 @ 10:22am
  
  Re: I'm shocked and dismayed
  They are interfering with my monopoly control of the market, and thus my ability to inflate prices to absurd levels!
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  - Hephaestus (profile), 9 Dec 2009 @ 11:02am
    
    Re: Re: I'm shocked and dismayed
    "They are interfering with my monopoly control of the market"
    
    Its Felony Interferance With A Business Model, they need to be stopped!!!
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- Steven (profile), 9 Dec 2009 @ 10:41am
  
  Re: I'm shocked and dismayed
  I actually don't understand the big deal over Redbox pricing. Redbox offers DVD's for $1 a day. Blockbuster offers DVD's for $5 for 5 days (at least last time I was there, it's been awhile).
  
  Seems to me it's the same price, just with more flexible terms.
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Anonymous Coward, 9 Dec 2009 @ 10:18am

The real question is what the revenue would be without this drain on the system, and then figure out the losses from there. Even if revenues are moving up, they would be moving up faster if there wasn't a hole in the bottom of the bucket.
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- ChurchHatesTucker (profile), 9 Dec 2009 @ 10:33am
  
  Re:
  "The real question is what the revenue would be without this drain on the system, and then figure out the losses from there. "
  
  I was going to post that as a joke, but you appear to be serious.
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  - Anonymous Coward, 9 Dec 2009 @ 11:15am
    
    Re: Re:
    It is a serious question. If you don't look at the full implications of something, you can miss what is really going on.
    
    It's sort of like the question of increased live music revenues: if those revenues are made by selling more expensive tickets to less people, has anything good really happened? Basically, are things getting better, or are they actually getting worse for the average consumer?
    
    So when you look at increased revenues, it's nice. However, if the true increase is whittled away by someone underselling your product, then you have in fact lost ground.
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    - Anonymous Coward, 9 Dec 2009 @ 1:08pm
      
      Re: Re: Re:
      Or you could be just an industry shill that goes around screaming "My way would have made more money" and try to discredit anyone who disagrees with you by saying "that's just an opinion".
      
      Here's something for you to chew on for a bit:
      
      If the industry had embraced Redbox, total revenue would have increased even more.
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- Capt Obvious, 9 Dec 2009 @ 10:37am
  
  Re: Logic fail
  And how does one account for the sales which were made only because of the "hole in the bucket" ?
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- BigKeithO, 9 Dec 2009 @ 10:55am
  
  Re:
  How is Redbox a drain on the system at all? They are doing everything legally and I'm sure they wouldn't be doing it if they weren't making money... So? Where is the drain?
  
  Is renting movies cheaper than Blockbuster somehow a drain on the system? Your argument doesn't make any sense at all. Think about it a little before you post.
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  - Capt Obvious, 9 Dec 2009 @ 2:35pm
    
    Re: Re:
    What AC is really concerned about is the unwanted competition. And AC denies the fact that much of the Redbox sales would not have occurred elsewhere if Redbox did not exist.
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Marcus Carab (profile), 9 Dec 2009 @ 10:21am

"...without anyone appearing to have read the part of the report that says the exact opposite of what the headline claims."

That's assuming anyone read it at all. In a lot of newsrooms, the concept of journalism is entirely lost when it comes to "studies". You get a press release about a study, there's a story - a few less inches of page you have to fill that day - so you write it up and publish it. After all, since you are attributing the study to a group, you aren't responsible for what it says or if its accurate. Sadly there don't seem to be many mainstream journalists left who know that their job is to break down such a report to see what it really says and offer contrasting viewpoints.
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LumpyDog (profile), 9 Dec 2009 @ 10:53am

This is why we need the government to protect the mainstream press. So they can take reports like this and not do a lick of research before parroting the findings.
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Yano (profile), 9 Dec 2009 @ 10:53am

with the Obama administration now focused on creating jobs lobbyist are exploiting that by suggesting that any innovation that challengers the business model of the old media corps are "Killing Jobs"

fucking lobbyists!
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fogbugzd (profile), 9 Dec 2009 @ 11:27am

Do we even care about free markets?
Do we even care about free markets anymore? What we have in Redbox is clearly a more efficient business method of delivery. That should be encouraged. Lost jobs should be irrelevant because in the long greater economic efficiency creates a lot more jobs.

Unfortunately, the jobs that may be lost are here and now, voting and making campaign contributions. Future jobs don't vote.
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hank mitchell, 9 Dec 2009 @ 11:31am

1981
if the studios realized in 1981 that the natural price/value point of owning a movie is $5.00 none of this discussion would exist. No redbox, no blockbuster, no netflix, The only reason they exist is because they are doing the market correction for the price point by providing rental service.
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sandman79 (profile), 9 Dec 2009 @ 11:52am

automation is good
I love the idea of redbox. nothing makes my day go round like having to deal with the snot-nosed minimum wage punks at the local rental store. Come to think of it is there anyway to automate fast food while were at it?
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- Anonymous Coward, 9 Dec 2009 @ 12:27pm
  
  Re: automation is good
  No doubt! Maybe the entertainment industry is finally coming around to seeing that they can be automated away like AutoTune, which wouldn't be a bad thing.
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Anonymous1, 9 Dec 2009 @ 12:04pm

"Unfortunately, every single press report covering this study seems to only take the PR headline from the report and repeat it, without anyone appearing to have read the part of the report that says the exact opposite of what the headline claims."

Due to the fact that they have a vested interest in misleading the public with sensationalism. Outside of public broadcasting, there hasn't been much "journalism" anywhere for the past..oh..40 years or so. About the same amount of time American culture has been on the decline. What a coincidence!
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Hephaestus (profile), 9 Dec 2009 @ 12:04pm

Oh no .....
... the efficiencies and competition that every other business in the US has faced for the past 200 plus years are now beginning to affect the media distribution industries. They don't like it, dont have the required skill sets, and have had a monopoly for so long, that they are not equiped to handle a changing market.

"Second, reducing the market price for new release rentals to $1 per night (as opposed to a more commonly offered $4.99 per multiple-night rental) could also induce customers to demand a lower rental price from all outlets. This in turn will threaten the rental revenue streams of distributors."

The studios make a percentage of every rental by the big video rental companies. The reduction in rental price from $4.99 to $1.00 will reduce their profits.

Windows are beginning to close, profits are beginning to shrink. With the ever accelerating rate of change we are seeing, lobbying for protection will not work. We have been seeing it in sweden and other parts of the EU. Everytime the law is changed the people adapt. So whats a media company to do ????
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Anonymous Coward, 9 Dec 2009 @ 12:32pm

Meh
Your local library for the win. You've already paid for them with property taxes, so why pay more?
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batch, 9 Dec 2009 @ 4:08pm

Is this some convoluted attempt to drive more people towards piracy by narrowing consumer's options? Hollywood won't get any sympathy this way. Redbox is legal and offers a service that some consumers prefer. Removing it would effectively raise prices on DVD rentals 400-500% ($4-5 a DVD). This is not the right thing to do if you expect to stay in business.
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