DVD exchange gives old discs new life

[Itsme]

DVD exchange gives old discs new life

By Reuters

With DVD sales expected to reach $21 billion next year, it may be comforting for consumers to know used discs now have a second life as tradable currency on a year-old Web site called Peerflix.

And at 99 cents a pop, the new commodities may threaten to erode demand for DVD rental services down the road.

Launched by two friends in Menlo Park, Calif., Peerflix went live a year ago and has grown to 40,000 users in the six months or so that it has been widely available.

Peerflix is a trading platform that asks users to make lists of DVDs they want and DVDs they want to get rid of, then matches "wants" with "haves" for 99 cents a trade.

The company provides a mailing label with a tracking number and shipping envelopes. Users must pay postage.

Each movie title is assigned between one and three "Peerbux," based on their desirability. Users rack up Peerbux each time they ship a movie, and can then use their loot to purchase movies from other users. Or they can buy Peerbux for cash to get the cycle started.

Peerflix co-founder Billy McNair told Reuters that the potential market for DVD trading is enormous, with the company's research showing that 60 percent of the 4 billion discs sold over the past eight years were watched only twice.

"There is no meaningful secondary market for these assets," McNair said. "But (Peerflix) can, in a convenient, cost-effective way take DVDs and trade them...for the DVDs they want to watch. That's the foundational core for the business."

A PricewaterhouseCoopers report shows that U.S. consumers are expected to spend $18.8 billion on DVD purchases this year, and nearly $21 billion in 2006. By 2009, DVD spending is expected to rise to $29 billion, the report said.

The Peerflix site clocked 10,000 trades in August and is set to nearly double that in September, McNair said.

Of the 65,000 DVDs available on the site, about 25 percent are unique titles, he said.

"We feel very comfortable that we are covering every mainstream movie people can think of," McNair said.

Wedbush Morgan analyst Michael Pachter said that while the company's growth "tells you that people have DVDs they want to get rid of," he did not see Peerflix as a threat to Netflix or Blockbuster, which also runs a trading service.

"I think the used market (for DVDs) is going to get huge. I'm just not impressed by 10,000 trades," he said. "It's free money for them and they're probably making good margins. But if the business is making $2 or $3 million, eBay will find a way to be in it."

Previous Next Peerflix does not aim to compete directly with online retailer Amazon.com or online DVD rental company Netflix, and McNair said his company may drive more interest in online DVD purchase and rental.

Netflix officials could not be reached for comment.

McNair would not disclose the company's revenue, but said it derives sales from both trades and the purchase of "Peerbux."

"Our revenue ramp has been substantial and has been terrific, exponential," he said.

Peerflix has obtained two rounds of venture capital financing, McNair said. Fortune magazine pegged those cash infusions at between $6 million and $12 million.

McNair said the company has drawn interest from other companies "trying to understand how our business works and what are plans are for the future."

"We feel we are building something that is going to be huge. We would be somewhat foolish to sell the business because it's early and we would be selling ourselves short," he said.

[Jeffbx]

Services like this are interesting to me (much like used book/CD sales).

Theoretically, there is NO difference between this type of service and illegally pirating a copy of a DVD. I'm not saying I condone such activity - I just find it interesting that in both instances:

- You don't pay the studio for the movie - no one gets royalties
- It would be considered 'lost profits' by the MPAA
- You're dealing with a potentially 'unlicensed' movie, since you're not the original purchaser

The only difference is that you're physically passing the original media from person to person. Now, if the producers/actors/RIAA/etc. don't see any profit from the secondary market, how is this more legit than piracy? Every movie that is traded on this site = more lost profits for the movie industry.

Of course, this is no excuse/justification for piracy - I just find the paralles interesting.

[sizemic1]

Interesting concept. I wonder if there's a CD version.

On a semi-related noted.... I've noticed somone on Craigslist offering to give you an IPOD filled with your music CD collection in exchange for your orginal CD's. Curious if anyone's done this...

[ialsohaveadream]

Services like this are interesting to me (much like used book/CD sales).

Theoretically, there is NO difference between this type of service and illegally pirating a copy of a DVD. I'm not saying I condone such activity - I just find it interesting that in both instances:

- You don't pay the studio for the movie - no one gets royalties
- It would be considered 'lost profits' by the MPAA
- You're dealing with a potentially 'unlicensed' movie, since you're not the original purchaser

The only difference is that you're physically passing the original media from person to person. Now, if the producers/actors/RIAA/etc. don't see any profit from the secondary market, how is this more legit than piracy? Every movie that is traded on this site = more lost profits for the movie industry.

Of course, this is no excuse/justification for piracy - I just find the paralles interesting.
You just summed up one of the many legal defenses I'd employ if I were a lawyer for someone sued by the RIAA or MPAA. (The Betamax ruling being the other major sticking point, despite recent Court rulings indicating a shift)

[ray]

Music and Movie companies don't get paid royalties on sales of Used items, so it wouldn't affect them one way or another. The main concerns over pirated music/movies and illegal downloads is the lack of regulation of release dates and obviously lost royalties for everybody involved in the profit sharing.

Also, one of the many problems with the DMCA is that the whole "Fair Use Act" only pertains to analog recordings and doesn't actually include any language regarding digital recordings. Hence, this is why I'm a huge advocate of actually fixing the law instead of trying to arrest everybody who is doing something illegal.

[ialsohaveadream]

Of course, this is no excuse/justification for piracy - I just find the paralles interesting.
By the way, did somebody mention piracy?

This chair be high, says I.

[ufcrusher]

Huge difference here between illegal copies and selling used copies. Lets say that JeffDX (no relation to JeffbX) has a large dvd collection, including the collected works of Debbie. In a vain attempt to keep his collection complete, JeffDX bought Debbie does Dallas :The Next Generation. He was surprised to find out that DDD:TNG has no relationship to the rest of the DD series.

Since JeffDX did not want to be seen like a pervert, but rather just a perfectionist, he decides to sell DDD:TNG. Trembler1 is a pervert, not a perfectionist. He sees DDD:TNG as just another excuse to allow his inner Quagmire out and immediately makes buys it and a box of reuseable hankies. Oh, Yeah!

From a legal standpoint, this is what occurs, JeffDX acquired a legal licensed copy of DDD:TNG when he bought it. He has all the rights and protections associated with that license. When he sells it to Trembler1, all of JeffDX's license transfers to Trembler1. He has all the protection and rights that JeffDX previously held....but JeffDX now has none. Its a perfectly legal copy because the rights were bought.

Now lets say that JeffDX was really a horndog after all and wants to let his inner Quagmire out to play. He goes to HORNDOGS'R'US and buys a movie. While he is there Ninja (no relation to the KY king) tells him about this great site, boobzilla, a P2P site. JeffDX goes to boobzilla and types in the words DDD:TNG, finding 1000's of copies listed DLs one for his "pleasure". This copy is an illegal download since he did not purchase a licensed copy. The only licensed copy is the person with the original copy.

Trace the license: Buy movie (lic) ---> sell/buy used original movie (lic)

[ArkiStan]

Of course there's a huge difference between selling used titles and pirating. The royalties have already been paid when the 65,000 titles available on Peerflix were initially perchased. In a perfect world of piracy, the same 65,000 titles could be availalbe to us, but without a single penny paid to the studios.

[Grimm]

Ok, ufcrusher. Here's a what if for you.

In your above example, if JeffDX did not sell his copy of DDD:TNG but instead decided to not open it to keep it in mint condition (he does have a licence however, he has purchased the movie). But he does want to watch the movie, so he goes to the P2P site Ninja (no relation to the KY king) reccomends and downloads a copy of the movie he purchased.
Is it a legal copy?
He does have a licence, but the source of the copy might not be legitimate. The source may or may not have a licenced copy.

Is it illegal when the P2P site's copy is illegal?
Is it illegal when the P2P site's copy is legal?

[Merlin]

Theoretically, there is NO difference between this type of service and illegally pirating a copy of a DVD.
The big difference has to do with the liscense being transferable. On CDs and DVDs you are purchasing a liscense to enjoy the intellectual property. You also have the ability to transfer that liscense to someone else - i.e. sell it used. I'm sure if Hollywood had its way the licenses would be non-transferrable as is the case with some software out there.

[Jeffbx]

Sure, I understand that the license can be transferable - that's what keeps this transaction legal.

The interesting thing, *I* think, is that with that license transfer, you get the same result as if the movie were downloaded:

- no income paid to the studio, and in fact,
- lost income in the form of someone who now has no reason to purchase a new copy

So yes I see the difference from a legal standpoint - one activity is legal and one is not. From a functional standpoint, however, the studio is in the same position as if that movie had been downloaded or copied from a friend. Hence my statement.

[Merlin]

So yes I see the difference from a legal standpoint - one activity is legal and one is not. From a functional standpoint, however, the studio is in the same position as if that movie had been downloaded or copied from a friend. Hence my statement.
The other key difference is that if I sell you my used copy then I no longer have it. But if I allow you to copy it from me then we both have it. The studio controls the number of times its product is licensed.

[Gothic Girl]

Services like this are interesting to me (much like used book/CD sales).

Theoretically, there is NO difference between this type of service and illegally pirating a copy of a DVD. I'm not saying I condone such activity - I just find it interesting that in both instances:

- You don't pay the studio for the movie - no one gets royalties
- It would be considered 'lost profits' by the MPAA
- You're dealing with a potentially 'unlicensed' movie, since you're not the original purchaser

The only difference is that you're physically passing the original media from person to person. Now, if the producers/actors/RIAA/etc. don't see any profit from the secondary market, how is this more legit than piracy? Every movie that is traded on this site = more lost profits for the movie industry.

Of course, this is no excuse/justification for piracy - I just find the paralles interesting.
But the movies have already been paid for, and everyone already got their profits. :shrug:

[ray]

But the movies have already been paid for, and everyone already got their profits. :shrug:

But by copying and giving copies to friends you are destroying the supply chain. Let's say 100,000 copies of Gigli are released on DVD. They somehow sell out completely and then each person who purcahsed one makes just one copy for a friend. Now you have 200,000 viewable copies of the DVD out in the market, but only 100,000 have been counted towards royalties. If the demand were high enough in the stores, then more would have been released.

[Gothic Girl]

That's fine for the pirated movies, but I was talking more about the movies that are exchanged.

[Jeffbx]

But the movies have already been paid for, and everyone already got their profits. :shrug:

But a big argument that the RIAA likes to throw out is 'lost profits'. Have a look at any article about piracy, and you'll see some rediculously high number (in the billions of dollars) that piracy is costing them.

What this number actually is is the total amount that people would have spent had they purchased the movie rather than downloading it. Here's an example:

Part A
Titanic is released. Great movie, everyone wants to see it. It comes out on DVD, and let's say there are 3 people that want to watch it.

Person #1 buys the DVD - studio gets a cut.
Person #2 rents it from Blockbuster - studio gets a cut
Person #3 downloads it illegally - studio gets no money

Everyone has now seen the movie, so none of them are potential customers anymore. Studio has 'lost' the revenue from person #3 because he didn't buy the DVD.

Part B
Same as part A, except person #3 buys the used DVD from person #1. Studio still gets no money. All 3 people are no longer potential customers. Studio has still 'lost' the revenue from person #3, but this was a legal transaction.

Cool, right? Buy used DVDs.

[DarkFury]

Services like this are interesting to me (much like used book/CD sales).

Theoretically, there is NO difference between this type of service and illegally pirating a copy of a DVD. I'm not saying I condone such activity - I just find it interesting that in both instances:
I disagree here...

If the selling of used CDs/DVDs was illegal, then all the retail shops that specialize in selling used cds and books would be deemed illegal and shut down... and last I checked, they were still running fine.

The arguement of "losing profits" on the viewing of the feature is irrelevant here. Just like EB Games can buy your used software (at least the ones that don't require a special license to play online.. like in most MMOGs) and resell them at a small profit. This "exchange" house is (i'm assuming here..) exchaging only LEGAL copies of DVDs here... much in the same way as any other retailer... the only difference is, the transfer of legal right to the DVD goes between the 2 "owners" and they only collect a fee for matching them together.

If both copies are legal... then I fail to see the "illegal" part of this transaction. Now granted, if one of them makes a "backup copy" :shifty: of the disc BEFORE trading it... then he may have done something illegal if he doesn't hand over the backup at the time of trade... but other than that, I don't see anything wrong with it.

The RIAA ain't gonna have a leg to stand on in this case... or else they woulda shut down all the 2nd hand music dealers years ago.

[johnnymk]

I really can't get too excited about lost profits from so called pirated movies. I suppose when I watch a movie at a friend's house, the movie industry has lost revenue. Oh Well.