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Tuesday, August 23, 2005

Video rental stores: Demise overdue?

Some great financial data in Lorne Manly's column today in the NY Times, "Extinction Long Seen, Video Stores Hang On".

Manly writes that since the mid-1980s, observers have been predicting that video stores would vanish.

    Yet that trip to the video store remains a stubborn fixture in the rapidly changing entertainment landscape. Complaints about the lack of selection, a paucity of hits and annoying late fees have not overcome the joys of browsing. Even the newer threats - the convenience of online subscription services like Netflix and the ability to order movies at the touch of a cable remote's button - are not expected by many analysts to crush the rental experience anytime soon.

The number of DVDs and VHS tapes rented "still dwarfs any other form of movie watching," Manly writes.

Some data:

    - Adams Media Research says that there were 1.1 billion DVD sales last year, compared to 350,000 purchases of movies through pay-per-view or video-on-demand.
    - Even though the video rental business has been shrinking each year since its peak in 2001, it was still an $8 billion a year business in 2004.
    - "...[T]he studios get about 60 percent of the list price of new DVD's, bringing in about $17 each. For each movie ordered by remote control, the studios get about $2."
    - Blockbuster lost $57.2 million in the second quarter; Movie Gallery lost $12.2 million.

I'd add that $8 billion businesses don't disappear overnight. The rental biz could plateau for a decade or more. It could move toward kiosks and "ATMs" for DVD rental. It could go from big stores to much smaller stores. But there's still something about browsing for movies in a brick-and-mortar store - especially one with a well-chosen inventory - that is tough to replicate.