The movie industry are on the attack after seeing the massive fall in DVD sales. Subscribers to DVD by mail company Netflix or DVD by vending machine RedBox, could soon see a hike in prices as the movie studios become oncreasingly aggitated that a big majority of buyers are renting DVDs instead. The rental market is up again this year to the detriment of the bigger profit market of DVD sales.

To try and redress this problem, Hollywood is considering all kinds of moves such as charging more to RedBox and Netflix, selling their DVDs to those companies after the retailers such as Wal-Mart. Even making the companies destroy old DVDs rather than putting them in the bargain bin. All in a bid to make the poor viewer pay more to rent, and encouraging them to buy instead.
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The latest announcement is that Paramount Pictures has found a different way to generate more revenues from its films and the DVD market. They have made a fairly inexpensive film called Circle of Eight and are premiering it online with Myspace. The idea is create buzz, and then rent or sell it through Blockbuster and other retailers.

This isnt the first time Hollywood has tried this. Back in 2007, Paramount spent about $2 million to make the third installment of its Jackass comedy and premiered Jackass 2.5 on Blockbuster’s movie streaming service. The studio then syndicated it to other sites, getting north of 15 million folks to see it, and sold about 1 million DVDs.

“It’s about finding an audience who really want to see this kind of a movie, give them a high-quality Hollywood style movie and build awareness,” says Thomas Lesinski, president of Paramount Digital Entertainment, who dreamed up the concept. “It’s just like a Hollywood premiere at a movie theater.” Of course, it costs less to make, you don’t have to stage an expensive red carpet event, and you don’t need to spend a ton on TV commercials.

And you don’t need to worry about theater owners, who complain loudly whenever a studio tries to hurry out a film on DVD too soon after it appears on the big screen. In this deal, Myspace gets the movie for seven weeks, then Lesinski and crew can do whatever they want with it. Better yet, Circle of Eight, which is presented in ten parts online, is sponsored by Mountain Dew, Blockbuster, and software maker Adobe, who have added games and other online extras. As a result, it may well be profitable even before it hits the DVD stores.

Which is exactly what Hollywood would love to do with more of its flicks.. Of course, that ship has sailed. Movie stars cost a ton, so do marketing campaigns to launch movies these days. But maybe there is a place for small films that make money for a studio using the internet. As small budget movies like Paramount’s surprise hit Paranormal Activity shows.

Circle of Eight was directed by Stephen Cragg, whose resume includes TV episodes of ER and NCIS. It’s soundtrack was created by a bunch of high-end composers, and the opening screen features a speeding police car, burning fire and a guy who jumps to his death. Hey, no one ever said this was Transformers. Still, as Hollywood struggles with how to resurrect a broken business model, at least this time a studio isn’t asking the consumer to pay a higher price or wait weeks before seeing a movie.

Whatever happens, its interesting seeing how the entertainment industry try to compete with and adapt to online TV and movies.

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