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From: brad@rtech.ARPA (Brad Bulger)
Newsgroups: net.video
Subject: Re: Why are prerecorded tapes so ?!$# expensive ?
Message-ID: <380@rtech.ARPA>
Date: Sat, 11-May-85 22:14:41 EDT
Article-I.D.: rtech.380
Posted: Sat May 11 22:14:41 1985
Date-Received: Tue, 14-May-85 23:48:40 EDT
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Organization: Relational Technology, Berkeley CA
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> Why are prerecorded tapes (specifically movies) so expensive?
> It seems to me (and friends I've talked to) that by keeping their
> price high, piracy is encouraged.  More money could be made by
> selling more tapes at lower prices than a few tapes at high prices,
> thats just elementary economics.


The primary reason that prerecorded tapes are (for the moment)
so expensive is that for most of the releases, the sales are made
to rental club operators.  Each sale represents the equivalent of
10 - 20 rentals.  Call it an eventual audience of 40 people.  I
don't know what portion of a movie ticket goes to the studios,
but if you figure they get at least $2 out of a $5.50 ticket, that's
$80 they'd be making from those 40 people under "normal" conditions.

Of course, the reason the only people who buy movies are rental
clubs is that the movies are too expensive...  I think the studios
are holding out for a revision in the first sale law - something
that would give them a cut of rental proceeds.  Then prices would
go down as rental fees went up (to preserve the clubs' margins).
It would be more attractive to buy then, which cuts down the "lost"
revenue per tape on average, PLUS they'd get a cut of the rentals
anyway.