The Long Slow Decline of Video Stores
Published February 13, 2004
Two big announcements this week drove home the point that the video rental business is in a long slow decline.
First was Comcast's offer to buy Disney. One of the main reasons given by Brian Roberts, Comcast's CEO, for the merger is the desire to have access to Disney's media content for delivery to consumers through cable service. As he pointed out in a television interview on CNBC TV, consumers used video-on-demand an average of 13 times a month. Who needs to rent movies when you can get them delivered to your living room via cable?
Then there was Viacom's announcement that it was getting rid of its controlling stake in the Blockbuster video chain. The reason: declining revenues, in part due to competition from video being made available over cable systems or the Internet.
A Forrester Research report supports the bleak long term outlook for video rental stores. This report (free by the way) paints a picture of a future where computers, media, networks and broadband converge. In the future, we will be watching movies on computers, delivered via cable TV signals over our home networks. In that future vision, there is no need for rented videos.
All predictions suggest that video stores will be around for another decade, because it will take that many years for consumers to migrate completely over to newer technologies. But the video rental store's heyday has come — and gone.
Adapted from a post that appeared on Small Business Trends, the author's weblog.
- The Long Slow Decline of Video Stores
- Published: February 13, 2004
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- Section: Video
- Writer: Anita Campbell
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Comments
And in the time period before video on demand takes off, the stores have to worry about video through the mail, a/k/a Netflix.
Ah, yes, Netflix. Another nail in the coffin.
Anyone working in a video store need not panic. This is a change that will happen gradually, because billions of people in the world don't act overnight. Especially since most of the population isn't nearly as tech-savvy as the people here on Blogcritics.
But happen it will, as we are freed from the physical bonds of the videotape and the DVD.
I don't see the death of video stores coming just yet:
1.) Video-on-demand stinks. NO cable operation right now offers on-demand PPV's that have even DD 5.1 sound, let alone a DTS track. If I go to Blockbuster, I can rent the DVD with that kind of sound, AND special features. Big ups to Blockbuster (now), but I suppose the cable companies will finally have at least DD 5.1 PPV, not to mention HD PPV.
2.) Netflix is a rip off. If I were the CEO, I might feel a little guilty taking peoples money. Remember that it's 20/month (no alternative fee arrangements), thus 240/year:
Let's say you have a movie buff. She ends up seeing 3 movies from Netflix a week. 3 movies x 52 weeks = 156 movies. If these were rented from Blockbuster for $4 per, that would be $624. Major savings for the movie buff.
BUT, how about Joe Schmo (not Matt Kennedy Gould) who only sees 1 movie a week? That's 52 movies a year, which would cost 208 dollars at Blockbuster, CHEAPER than Netflix. Not only that, if a movie I want to see comes out a certain day, I have a chance of renting it that day. It's impossible for Netflix to have me watch a movie that same day its released on DVD. The best they can do is the next day, if that.
The person who REALLY suffers from Netflix is the one who has off and on months renting flix. One month it's 7, the other 2, the next 3. Let's say this person rents 48 movies in a year. That's only $192 at BB.
Unless you rent a ton of movies each month, EVERY month, Netflix can be a rip off.
Combine that with the fun of walking down the aisles of a video store looking at DVD boxes trying to find anything better than "Daddy Day Care" or "Bringing down the house", and you will see that Video Stores are not dying, just yet.
But wait, I just saw that walmart.com rents dvd's for 88 cents. NOW THAT could drive Video Stores out of business.
lol....Pappy has a point. But is there ANY business the great WalMart monstrosity is not going to snuff?
The Wal-Mart point is a good (and sad) one. Blockbuster's decline, for example, is also partly attributable to competition from Wal-Mart selling DVDs at such low prices.
Anyway, this change is not going to happen overnight by any means. We're talking years -- a decade. There is always a span of years while one consumer technology ramps up and another ramps down, and the two co-exist for some time together.
Take for example, the transition from VHS to DVD. For years the predictions have been that DVDs will replace VHS, and gradually they are. But today there are millions of people out there who don't even have DVD players and still use VCRs. I am one of them -- although it IS getting harder and harder to find VHS tapes to rent. I can see that in my local video store, where the DVD selection is far greater than tapes. Eventually I will be forced to go to DVD because I just won't be able to rent VHS tapes anymore.
But then the next shift will be away from any kind of "physical" media to delivery of movies electronically. That shift will also be one that ramps up while DVD usage ramps down, gradually over a period of years.
I can't wait for HBO On Demand to be available in this area. We just got HD cable through Comcast. They say by year end we'll be able to pick that up. My issue with premium stations (HBO, Showtime, etc) has always been that I couldn't watch the shows when I had the time to watch them. I can still TiVO them, I suppose, but then you still have to wait for them. The On Demand service will take care of that, without the associated pricey pay-per-view fees.
Blockbuster had (has?) a similar deal to Netflix where you can rent as many movies as you want, two at a time, for a monthly fee that is comparable to Netflix (a little more expensive when we tried it). We found ourselves going through the store's entire library of movies that interested us over a six month period.
Getting everything through our computer and not having to visit the store and pay those ridiculous late fees (which is where these videos stores make the real money), sounds like a good progression to me.
I do feel somewhat badly for the small video store operators who know your name and what kind of movies you like (like the small local banks), but then most of these folks are being pushed out of biz by the likes of Blockbuster, Hollywood and other video store chains.
I should have added a link for those that might be interested, for HBO On Demand availability
I have HBO on Time Warner Cable in my area and they offer HBO-On-Demand. My beef with that is that it COSTS EXTRA. After dishing out $$$ for HBO, I shouldn't have to pay for HBO On demand. Other channels, such as A&E, and CNN, have free on-demand, but when I PAY for HBO, I should get HBO on demand for free.
Instead of paying the fee (7 bucks per month), I pay for a DVR box and record HBO movies/shows when I cannot see them. Soon our area will have the HD DVR box, and we will be able to record HBO-HD and see it when we want.
If anything, TiVO, and cable co's offering DVR's (especially when HD DVR is nationwide) will kill on demand. Why do I need "Curb Your Enthusiasm" on On Demand when I can just Tivo/DVR it?
Pappy -
1) I just answered this question in my trackbacked blog entry about why On Demand can be a benefit even to those who already have TiVO.
2) the comcast sales agent I spoke to told me that as long as we already had HBO, we would not pay extra for HBO On Demand service when it becomes available in our area, so apparently this is something that varies based on locale.
Maybe if enough people complain at your cable company, they'll change their policy?
Anita -
Not only do I not yet have a DVD player *blushes*, but I decided to cancel cable a while back. I decided that $65 a month was a complete waste of time and I needed to read more books. So I get about six channels, though all I really watch anyway is sports, American Experience, Nova, Seinfeld reruns and for some strange reason Survivor. I do miss HBO, as their weekly programs (Sopranos, Six Feet Under) were excellent. But I figure when I do eventually get a DVD player I can rent those puppies by seasons.
My favorite video store is an independent little dive near the SMU campus. It literally has thousands of videos and DVDs, kind of like walking into a library, with even a silent film section!! You can usually see me upon the ladder (the shelves reach to the roof) searching for old movies from the 1960s and 1970s (found a terrific film the other day called "I Love You Alice B. Toklas" with Peter Sellers). I suppose when they close that store, I will buy a DVD player.....or go back to cable, of course.....
Don't blush Anita, I went without cable for about 10 years, mainly because my children were so young that I did not want them bombarded by the onslaught of tv shows and commercials. We just got our DVD player and cable, and sometimes I do feel like it is a waste of money and time. I'm thinking about nixing it next month.
I find it odd that there are people here who don't own (let alone want) a DVD player. I have seen many many white-trash (and ghetto) ultra poor folks buying up Apex DVD players at Wal-Mart, and even they would find it strange that some Americans don't own a DVD player
(I don't count of course, as I have a projector on which I watch shows in 80 inches of HD [High Definition, HDTV] projected onto my wall, along with DD and DTS 5.1 sound from my 5.1 audio system(although I am lagging considering the influx of DD EX and DTS ES)).
Considering that most video stores today carry more DVD's than VHS tapes, people who don't own DVD players must be people who don't rent movies, period. These are probably the same people who don't watch much TV either.
I'll try, but I find it hard to relate. I find it hard that anyone besides the elderly can relate.
Yes DVD's will eventually die out, perhaps to streaming content, perhaps to better technology (like the soon to come blu ray DVD's, and HD-DVD's (We already had an HD-DVD released last year)). But right now the complete rage is DVD, and it's not a fad (unless you consider the life of VHS to be a "Fad", but I doubt that). DVD fads that came and went (or soon will go in my book) are DIVX (The stupid program where you bought a DVD for 3 bucks, and then had to pay for each viewing) and EZ-D (the new Disney thing where when you open the package, you have 48 hours to watch the DVD before it becomes unwatchable [The disc decays in some way]. They say this allows you to watch this when you want, and not worry about returns. The thing is, EZ-D's run for $6.99 or higher. If they were $2.00, they'd really have something. Right now they have nothing)
I'm sorry but not owning a DVD player now is like not having a VHS player in 1990. I encourage everyone to at least get a cheapie (Apex) DVD player and join the 21st century.
Good point Pappy and I don't disagree. When the day comes when I cannot find a good film on VHS (was able to rent "Lost in Translation" and "Open Range" the other day, both of which were superb), I shall jump over to DVD. I had a hard enough time trying to get rid of my 8-tracks (that was money well spent).....
I am not yet 40, but am amused about being compared to the elderly.....And I try to avoid WalMart whenever possible. I am always so depressed after leaving that store.....
Video stores will have to go the same route as record stores and start concentrating on niche markets. We hardly ever rent anymore - it's easier and not much more expensive to just buy the DVD and not worry about returning, late fees, condition of the copy, ownership incentive, etc.
I can't imagine not having a DVD player at this point and we don't even watch it that often. We have one with the "family entertainment center," my teenage son has one with his X-box in his room, and the 4 year-old has a VHS with her TV in her room, which provides blessed relief from her shows/videos on the family player. Plus, VHS tapes are really cheap these days and she aseems to do a lot less damage handling the VHS cassettes than DVDs, with their exposed playing surface.
How fascinating!!! All the men responding couldn't live without their DVD players and all the women responding couldn't care less. Does this suggest the oft-quoted truism is really true, that men are much more into technology than women? Hmmm? Marketers take note.
"Video stores will have to go the same route as record stores and start concentrating on niche markets. We hardly ever rent anymore - it's easier and not much more expensive to just buy the DVD and not worry about returning, late fees, condition of the copy, ownership incentive, etc."
This I find very hard to believe, although I was first exposed to this concept in reading a Home Theater magazine where people say even the worst movies deserve to be bought, not rented.
ARE YOU KIDDING ME??? This is absolutely insane. I can't imagine ANYONE wanted to own the DVD of movie they cannot stand. Let's say in a given week 5 movies come out that you want to see. If you buy them, all for say $20/each, that comes to $100. If you don't like 3 of them, you have BLOWN $60.
Now let's say you rent from BB. $4/each. That's $20...let's say, like the previous example, you don't like 3. You only wasted $12, and you don't have to keep it. If you like the other two, buy them for $40. Now you have spent $60, but you have seen 5 movies, and not wasted money on buying 3 of them.
The idea of buying these movies instead of renting bewilders me. From that magazine I read, someone said "Why rent for 5 when I can buy for 15 dollars more (20)?" $20 for a movie you have seen and you want to own? Great. But $20 for a movie you haven't seen, and then when you see it, it's the worst movie ever? Please.
I know some of you will say that you can always sell the bad movies, but you won't nearly get your money back.
Working example in case this doesn't make sense: My wife wants to see this stupid movie "My Boss' Daugther" with Tara Reid and Ashton Kutcher. We can rent it for $3.99 or buy at Wal-Mart for $19.74 or something like that. WHY ON EARTH WOULD SHELL OUT $20 FOR THIS PIECE OF GARBAGE? Just pay the 4 bucks, let my wife enjoy the stupid movie, and get it out of my sight. End of story
Anita: I never said I couldn't live without my DVD player. I said I can't imagine anyone, male or female, without DVD players in America today. There is a difference in the two statements. Many home theater forums refer to WAF (Wife Acceptance Factor). It's a big deal, and most of these guys note that their wives didn't give a damn about DVD, HDTV, 480p, 720p, 1080i, UNTIL THEY SAW IT in their home. My wife didn't want the projector I bought. She couldn't see what the big deal was...until we got it and she feels like we have our own little movie theater in our apartment and loves it!
I suspect if you were friends with someone (or involved with someone) who was really into Home Theater, you would get to experience it, and perhaps like it (And no, seeing these things at Best Buy/ Ultimate Electronics/ Circuit City doesn't count). I am not saying you would rush out to buy these kinds of things, but I am sure you would see what the "fuss" is over.
Wait! I'm a guy!!
I suppose I read like a girl and Mac Diva reads like a guy.....
Ooooops! Sorry Chris.
Between your comments and Pappy's, I guess that means the male/female theory is debunked. Ha ha ha.
Well, I tried to be macho when I wrote my Allman Brothers blog!....lol
But please don't blame Pappy. Blame Mac Diva. Blame everything on Mac Diva.....
GameznFlix.com is a new Games and Movie rental service, sorta like Netflix. They are "tweaking" their website, which should be running smooth before the Ben Curtis tv ads begin next month. Right now deliveries vary, but I hear it's improving. Get my dvds in 2 days. They will open more dist ctr's this year. They have a nice deal with the "ANNUAL PLAN"...$222 dollars a year, plus 2 xtra months for 6 dvds/games out per month. Can't beat it, plus..over 28,000 titles to choose from. Check it out.






Nice blog Anita.
This scares me, but unfortunately, you are most likely correct. The sad thing is I used to love going to the video store with my parents and finding a film.
I had knowledge of older films, and my parents were always interested in what I would pick out. I am sad that this will not be the case anymore. A trip to the video store was akin to going to the theater in the 1950s, or even going to the Drive-In. Now, it is becoming a thing of the past.
There was something exciting about going to the video store, wondering what would be available, what we would watch that evening.......
Too bad we can no longer play on the swing set in front of the huge, larger-than-life screen.....