Sure, We’ve Got That!
In an age of cable-on-demand, Netflix and BitTorrent, it can be tough running a mom-and-pop video store. But give a few of these independent retailers credit for ingenuity: they've come across a novel trick for turning the competition into part of their supply chain. Instead of paying $20 or more for every obscure foreign or documentary title a customer requests, a few stores have begun using Netflix accounts to procure the title, slip it in a blank case and re-rent it to customers. "It's nice to be able to offer the latest foreign title that no one has heard of," says one Massachusetts store owner, who typically rents out 10 to 15 Netflix discs a month, saving more than $2,000 in annual inventory costs. (The $4.50-per-disc rental revenue more than covers his three Netflix accounts.) Ted Engen, president of the Video Buyers Group, which represents 2,000 independent video stores, says a small number of retailers have been exploiting Netflix in this manner for years. He thinks the problem has waned as DVD prices have come down, but suspects it could grow as pricey Blu-ray discs (which cost up to twice as much as existing DVDs) become more prevalent. "We could see this fire back up," Engen says.
It's not just video retailers. Last month the Sanbornton Public Library in Sanbornton, N.H., put an article in its local paper inviting the public to sign out DVDs via the library's Netflix account, effectively piggybacking the town's 2,900 residents on a single account. Right now the library is using Netflix's $16.99 three-discs-at-a-time membership, but "if we get a lot of requests, we might go up to the next level," says librarian Martha Bodwell.
Netflix, aware of the practice, is not a fan. Spokesman Steve Swasey says the Netflix customer agreement clearly states that DVDs are to be used only for personal enjoyment, not for renting or loaning to others. However, with 1.8 million DVDs shipping from Netflix warehouses every day and no obvious way to catch rental bandits, Netflix has limited ability to police it. Swasey says anyone caught doing it will receive a reminder that they're breaking the terms of their contract. How about sending a copy of "There Will Be Blood"?
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Daniel McGinn is a national correspondent, based in Boston. He writes about management and other topics, and also helps oversee Newsweek's partnership in the Kaplan-Newsweek MBA program, which launched in late 2006.
McGinn joined Newsweek in 1992 as a summer intern. He worked in New York until 1996, when he moved to Detroit as a correspondent and bureau chief. In Detroit he covered the auto industry and other Midwest business stories. He moved to Boston in 1999. He has written cover profiles of business leaders like Bill Ford and Jack Welch, along with cover stories on topics ranging from the economy to marriage to children's television. His work as won awards from the Automotive Press Association and the National Association of Real Estate Editors, and he was twice ranked among America's 30 best young business reporters.
McGinn is a magna cum laude graduate of Boston College, and he also holds an MBA from Auburn University. His freelance writing has appeared in Wired, Inc., Fast Company and The Boston Globe Magazine. He has appeared as a guest on NBC's Today Show, NPR, CNBC and MSNBC. His first book, "HOUSE LUST: America's Obsession with our Homes," will be published by Doubleday in December 2007. A native of New Jersey, McGinn and his wife live in Massachusetts with their three children.
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