Marion Star: Movie Rental Business in Steep Decline

The Central Ohio Marion Star is reporting: Movie Rental Business in Steep Decline. I think we've all noticed this, but these numbers are scary:

Since 2001, the movie-rental industry has shrunk 19 percent, according to Carmel, Calif.-based Adams Media Research. That has left companies such as Blockbuster, Hollywood Video, Movie Gallery and independent operations fighting over ever-smaller pieces of the entertainment pie.

In the early 1990s, there were about 70,000 stores around the country that rented movies. Today, there are about 18,000.

Is there hope for the small video store?

Comments

[John Doe]

Just wanted to say... in the big picture movie rentals *is* probably going down.....But.

I work in a rental store (NOT blockbuster)... and I've been with the company for 3 years and a few weeks now (same store) and for OUR store we've actually made more revenue each and every year. Heck just this year alone, weekly we've made 30%-50% more revenue than last year. (this isn't just our store either... our district and our region is seeing the revenue). (I'm in southern california).

We look at what is selling compared to last year, and game rentals are up by 50%-100%, Movie Rentals up 150%, and movie purchases (previously viewed) up 500%.

[CashForFlow]

John Doe,

You're right about national averages being too broad. Regional averages would be more helpful. Albeit, the national rental chains are likely experiencing the given national averages.

[n3w7yp3]

it makes sense that the national averages are going down, because netflix is knocking the crap outta Blockbuster and all them other dudes. But yea i agree that it would help to see the overall picture more clearly if the regional averages were shown.

[x33f3w]

n3w7 you didn't read the figures. It includes Netflix. All rentals are going down. Netflix is getting an increased market share in a market that is dropping 5% a year and will continue to drop. The main elements are Tivo and outright purchasing. Netflix isn't now and isn't in the future going to be part of those markets which are causing the drop in rental market.

[Aron]

Adams research is well regarded, but there are several other firms and none of them suggested quite as big a drop.

The single biggest reason for declining rental is increased DVD purchase. However, the average number of discs being sold per household has actually declined. That is, there is a noticeable pattern of about 2-years of heavy DVD purchase after first acquiring a DVD player, followed by a decline in purchase rate.

The rental decline should taper over the next few years now that DVD player penetration is exiting its explosive growth phase.

Studios are looking to reignite another wave with HD-DVD and BluRay. But I think most people would admit that these formats won't be quite the phenomenon that DVD has been.

"Adams research is well regarded, but there are several other firms and none of them suggested quite as big a drop."

Huh? PriceWaterhouseCoopers is predicting a bigger drop.

[Chris]

This topic isn't hard to figure out in my area at least. Every year until the past 2 or so, every local video store in my area had $1 night for any movie on tuesdays and wednesdays. Other nights, new releases were $2.49. The main reason for the drop in DVD rentals is the price increases from rental stores that came with DVD's replacing VHS tapes. Overall though, the price to purchase a DVD or VHS has remained constant. It doesn't make much sense for somebody to pay almost $4 a night when they could purchase a new release for $10-20 on online sites such as ebay, half, amazon, and columbia house.

[brian]

Chris, that is a great theory, but the increase in cost is simply a reflection of inflation, because my company has not raised prices in the 7 years I have worked for them, and our sales have dropped significantly as well. The key is the DVD are all sell through, in the past, most VHS did not come out for rental and sale at the same time, there was usually a 3-6 month window that VHS could be purchased for a higher cost $50-$104.95 by rental businesses, thus forcing rental to see the movies. In 3-6 months you would see them in the stores at retail prices that were more reasonable, but all of us rental stores already made our money in the first 90 day window. Present day , you can buy a dvd for $10-$20 the day it comes out for rental. This creates a huge problem for the rental business, but this is why you see alot more copies of movies on the shelf, where you may have gotten 10 copies of a movie on VHS in the past we get 50-100 copies. Theft has also become a much bigger problem in the past 7 years, again creating higher prices at most competitors, while my company has not raised prices, I can see the competitors angle for having to raise prices. When I started with my company, people rarely stole from us, meaning we could turn a bigger profit on a lower cost item,simply because of having movies available to rent. Now people don't think they should have to pay late fees. Little do they know, not paying late fees now, costs you more later. If you do not return a movie on time, that is money the rental store loses for not being able to rent it out, but that cost is only absorbed for so long before most places raise prices(blockbusters prices raised almost immediately after the no late fee blitz). I hope this is only temporary, and the rental business is figured out so that I can stay in it. I must say I am a District Manager now and I love the people I meet everyday in this line of work, it truly is fun to be in the entertainment industry. See you all at Family Video if you live in the Midwest or North Carolina !!!