Our take...
Screen Digest understands that UPIE's move, which has been under discussion for two years, is not directly linked to Universal's ongoing legal battle with RedBox in the US. Nonetheless, both it and Fox's strategy address similar issues: studios' desire to increase their share of rental spending, exacerbated by concerns that new, cheaper rental options are cannibalising their more profitable revenue streams.

UPIE's approach reflects its belief that—unlike in the US where the First Sale Doctrine prevails —the European Union's 1996 Rental Right Directive (RRD) not only guarantees content owners the right to 'equitable remuneration' for rental (i.e. allows them to charge a rental premium) but also enables the outright prohibition of rental. The fact that UPIE is not seeking a new deal from traditional rental stores or, Screen Digest has learned, from Blockbuster's online operations, suggests that both are already operating on more favourable (to the studio) terms. In fact, online operators generated 47 per cent of UK rental transactions in 2008, but accounted for just 10 per cent of new release sales, according to studio sources.

If other studios follow suit, as they did when Universal launched the first salvo against Redbox in the US, the implications for the online rental sector are significant—and in particular for market leader LFI, which has long been expected to launch an IPO. UPIE is reportedly seeking around £1.50 per rental transaction, a figure that would dramatically alter the prevailing business model. Furthermore, since the RRD applies across Europe, there is every likelihood that the policy will ultimately be extended other territories where studios feel they are not receiving a sufficient share of rental spending.