Australian DVD Rental Industry Commentary

The DVD rental by post industry was pioneered by the US film Netflix, launched in 1999 to take advantage of the power of the internet and easy delivery of DVDs by post, while eliminating hated late fees. Growth has been slower in the Australian market, lagging behind the US and Europe, but really took off in 2005. The situation is similar to the late 1990s mobile phone craze, before the market reached saturation. Prices are low to entice new customers, and most services offer a free trial or at least a reduced price for the initial months. The conversion rate from the industry standard two-week trial to paying subscription initially was 90%, though we understand it is now around 85%. This decrease in free trial uptake is likely to gradually continue, fueled by a growing number of serial free trialists, as well as subscribers lured away by lucrative offers and free trials elsewhere.

These sites are building consumer confidence that the online rental models works, as news spreads from the early adopters (technophiles and such) past the "tipping point" into the mainstream, when growth really explodes. Initially, the industry has appealed to the young and online savvy, elderly and housebound, as well as those living in rural areas far from the nearest rental store. The industry is also favored by the aficionados seeking niche films a local video store with limited inventory (averaging only 2-3,000 titles) simply won't stock.

The Australian online DVD rental market will probably continue strong growth for at least several more years as it goes mainstream, driving many high street video shops out of business in the process.The exodus to rental-by-post will obviously hurt the 2,000 or so Australian video shops, many of which will probably close. In fact, we've seen consolidation of the online industry in recent years, with the number of online providers diminishing from 8 and now stabilizing at 3. The big shock in September 2011 was market leader BigPond's closure of its online DVD rental arm, leaving Quickflix as the clear market leader, with the smaller WebFlix still a strong contender, and the new Blu-Ray only Moviebase fighting to gain market share.

So enjoy the free trials and cheap subscription fees while you can. We at will continue to guide the way with our reviews and rankings, helping you pick the best.

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