December 17, 2006 9:00 PM PST

DVD swap site switches from credits to cash

Peerflix is getting out of the barter economy.

The DVD-trading site, which has about 250,000 regular users, will now let participants swap their old DVDs for money or monetary credit to buy other DVDs being sold on the network. The idea is to make exchanges on the site more liquid, the company's CEO, Billy McNair, said in an interview.

Until now, consumers could sell old DVDs on the site, but in return they got credits for buying someone else's old DVDs. The discs were given number ratings (1, 2 or 3) rather than dollar values, depending on demand or rarity.

Thus, in the old system, Independence Day and Crash may both have had an equivalent 2 value, and getting one for the other would have been a straight swap. Under the new system, Independence Day may be rated at $5.43, while Crash gets a $7.19 value, putting the person with Crash in a better position.

"It brings in a profit motive that wasn't there before," McNair said. "There was also a learning curve with credits. Cash is easy to understand."

The monetary value of the discs is set by an algorithm developed by Peerflix. The company has also revamped the look of its site to make it easier for users to post movie reviews or information about their own cinematic likes and dislikes.

Since 2005, the company has grown fairly rapidly and now processes about 30,000 to 50,000 trades a month. While consumers use the site to get rid of old DVDs and buy new ones for their collections, many use it as a substitute for renting movies, said McNair. People buy a DVD, but then trade it away again in a week. The short period of ownership becomes the equivalent of a rental.

If a consumer watches only three to five movies a month, swapping movies in this manner is cheaper than renting or using flat-rate subscription services like Netflix, McNair asserted. Each Peerflix trade costs a consumer only 99 cents (assuming the movies you trade have the same value of those that you buy). As a result, five movies would be $4.95.

The company's network has listed 35,000 different titles for sale, and the popularity of many movies means that they are perpetually available.

"Documentaries do quite well," McNair noted.

So why should consumers use the site rather than much larger sites such as eBay, Amazon.com or Craigslist, to dump their used, unwanted DVDs? Convenience, McNair says. "You don't need to download a picture," he points out. Peerflix supplies the movie art.

And because Peerflix determines the price of the discs through its algorithm, consumers don't have to track bids or determine a market price for their discs.

Additionally, the company tries to automate much of the buying and selling process. Consumers essentially list the discs they want to sell and those they want to buy. When Peerflix finds a buyer on the networks, it notifies the seller and discloses the price and the name and address of the potential buyer. The seller then (if he or she chooses) contacts that person. If the seller doesn't respond to the potential buyer in a certain amount of time, the order is passed on to another seller. The company also tracks the progress of the order after mailing.

The buying process is similarly automated. Once you have monetary credits built up, the system examines your wish list and buys the movies on your behalf as they come up.

"With this, you can say, 'I want Shrek' and it will come to you," McNair said. The company will also suggest movies based on past purchases.

Peerflix does not take title to the DVDs. Instead, it charges sellers the 99-cent trade fee. The company's cut is invisible to buyers: if you buy an $8 disc, the seller gets $7.01 and the company retains the rest. Peerflix supplies sellers with envelopes.

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11 comments

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Genious
Now if they could do this with simple downloadable files that expire after so many days, and then let another person download it, return it, and then another. That way only 1 person has access rights to each movie at any point in time and copyright laws aren't broken.
But I've already posted about how I think that intellectual-property is an oxymoron and can't actually exist on a platform such as the internet. I feel that all media and information should be made free to everyone at basic operating costs. It will happen one day... and that day will be beautiful.
Posted by coryschulz (326 comments )
Reply Link Flag
Dumb...Very Dumb
If it we're all sold at operating cost, thus removing profit, you remove the incentive to create and publish media and information. Businesses are created on the idea that they will earn a profit not break even (ie. operating costs). Breaking even isn't worth the risk of startng a business.

It a little concept called "capitalism" and it has work well for many countries.
Posted by mstrclark (62 comments )
Link Flag
And they still blame piracy....
It's companies like this that are one of the reasons why theaters and high street DVD sales aren't the cash cow they once were, yet the industry still chooses to blame piracy, and uses it as an excuse to screw the consumer with copy protection, high retail prices, and efforts to criminalize or disrupt file sharing networks.
Posted by perfectblue97 (326 comments )
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Ebay?
How is making the money trade any different than something like EBay or their subsidiary half.com?
Posted by zaznet (1138 comments )
Reply Link Flag
But what's the use...?
I'm old-school. I only want to know how to get cover art so I can
put these used DVDs in a nice shiny clam-case to put on my
bookshelf. I have no problem with buying and selling used product;
I just complain that Peerflix keeps the cost down by throwing away
the DVD box.
Posted by grtgrfx (221 comments )
Reply Link Flag
How about a new DVD trading site?
Flickflop is the newest way to trade your used DVD movies. Unlike Peerflix which abandoned the barter model, flickflop uses a variation on the trading model by trading DVD against flickflop's own inventory of movies.
Posted by deckreyes (2 comments )
Reply Link Flag
Swapster lets you trade dvd movies, music cds, books and video games for points and then get whatever you like with your points. It's better because you can get the case and artwork if you want. People that like to collect media should like this better than NetFlix.
Posted by bvdon (231 comments )
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