September 19, 2005

Peerflix Gets Coverage

With DVD sales expected to reach $21 billion next year, it may be comforting for consumers to know used discs now have a second life as tradable currency on a year-old Web site called Peerflix. And at 99 cents a pop, the new commodities may threaten to erode demand for DVD rental services down the road. Launched by two friends in Menlo Park, California, Peerflix went live a year ago last summer and has grown to 40,000 users in the six months or so that it has been widely available.

Peerflix is a trading platform that asks users to make lists of DVDs they want and DVDs they want to get rid of, then matches "wants" with "haves" for 99 cents a trade. The company provides a mailing label with a tracking number and shipping envelopes. Users must pay postage. Each movie title is assigned between one and three "Peerbux," based on their desirability. Users rack up Peerbux each time they ship a movie, and can then use their loot to purchase movies from other users. Or they can buy Peerbux for cash to get the cycle started.

Peerflix co-founder Billy McNair told Reuters that the potential market for DVD trading is enormous, with the company's research showing that 60 percent of the 4 billion discs sold over the past eight years were watched only twice. "There is no meaningful secondary market for these assets," McNair said. "But (Peerflix) can, in a convenient, cost-effective way take DVDs and trade them ... for the DVDs they wanna watch. That's the foundational core for the business."