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Sunday, November 8, 2009
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Thursday, October 8, 2009
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Tuesday, September 8, 2009
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How do I start a DVD rental business?
How and what do you need to get into this business? I have two teenage sons who would love to own a dvd rental company. It would be a chance for them to learn and generate money. If you could contact me on how to invest into a machine -- I would appreciate your thoughts.
Dave's Answer:
If you're talking about just opening up a storefront or even a room in your house where you'd have a library of DVDs that people could rent for a dollar or two per night, I am pretty sure that the only cost you have is inventory. But that's not easy to manage...
If you look at how companies like Blockbuster operated, you'll see that when a hot new movie comes out, they'll buy dozens, if not hundreds of copies for each store, incent people to return the movies quickly so they can have lots in active circulation, and then as soon as enthusiasm dims, put them up for sale as "previously viewed". After a while longer, they go into the bargain bin and might be $9.99 or cheaper, far cheaper than the brand-new DVD would cost.
In a perfect business where there's zero overhead, you could buy new movies for $25/DVD and rent them out for $2/rental 50-100 times before the disk is trashed, making a pretty good profit (that'd give you $75-$175 profit/disk). If you can get it perfect. The problem is, you'll buy the wrong movies, people will break the disk, some manufacturers will make disks that only stand up to 15-20 playings, and you will have overhead, inevitably.
The advert in the local paper, the fliers, the computer you use to track rentals and followup on people who forget to return the movies, the write-off for theft, loss, a business license, etc., all of these are going to be overhead costs and I'd be unsurprised to find out that it's not insignificant, and doubly so if you have any sort of retail space.
But you're talking about an automatic DVD rental device like those used by Redbox and the like. Definitely a cool idea, but remember that not only are those devices going to cost a good amount (I'm guessing over $50,000/device, actually) but you are going to have to rent space in front of, or inside of, a retail merchant. They might want a flat fee plus a percentage of the rental revenue.
Having said all of that, I'm sure that rental companies get DVDs for far less than us consumers. There's no way that Blockbuster is spending $25/DVD when they buy thousands of copies of any given movie for all their outlets. That doesn't mean you could get in on the deal if you're buying 2-3 copies of a given film, but you should be able to work something out with a distributor. If you have a business license and storefront or other sign of legitimacy (and "selling them on eBay" is not likely to work :-)
Perhaps someone who has actual numbers can jump in here, but I would say that acquiring a DVD rental machine is likely prohibitive for your sons, but an informal out-of-the-house operation could probably work out pretty well and would be a fun business.
Wednesday, July 8, 2009
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