Business Model
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The standard business model for video rental stores was that they would pay a large flat fee per video, approximately US$65, and have unlimited rentals for the lifetime of the medium itself. Sumner Redstone, whose Viacom conglomerate then owned Blockbuster, personally pioneered a new revenue-sharing arrangement for video in the mid-1990s. Blockbuster obtained videos for little cost and kept a 60 percent rental fee, paying the other 40 percent to the studio, and reporting rental information through Rentrak. What Blockbuster got out of the deal, besides a lower initial price, was that movies were not available for sale during an initial release period, at least not at an affordable price point – customers either had to rent, wait, or buy the film on tape at the much higher MSRP targeted at other rental chains and film enthusiasts, at that time then between $70–100 before the end of the initial release period.
Read more about this topic: Blockbuster LLC
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