Mom and Pop Video Stores Loving Netflix

This Newsweek article cracks me up, and it showcases a clever strategy: Mom and pop video stores are renting DVDs from Netflix and re-renting them at their stores.

"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 a dog-eat-dog world out there. Even a public library is doing this, effectively letting the town's 2,900 residents use one Netflix account. This practice is against Netflix policy, but they can do little to stop it. Reminds me of indie record stores going to Best Buy to get CDs because Best Buy's sale price can be lower than their distributor's wholesale cost for a given title. Best Buy had a "policy" to stop this, but stores found ways around it.