April 20, 2010

Where'd all the movie rental houses go?

Finally the newspapers have someone else to write sad stories about being now obsolete...
...Once a staple, brick-and-mortar video rental stores fall victim to kiosks and subscriber services...Once we used to read printed newspapers too....

Where'd all the movie rental houses go? - sbj.net - Springfield Business Journal Online - Springfield, MO

Once a staple, brick-and-mortar video rental stores fall victim to kiosks and subscriber services
Chris Wrinkle

Recent closings of at least three video rental stores in Springfield illustrate questions the industry faces.

The casualties include a Blockbuster at 1839 E. Independence St., which closed Feb. 28, and two Movie Gallery stores, one at 1380 E. Republic Road that closed in late March and another at 2127 W. Republic Road, which is currently liquidating inventory.

Studies indicate that a reason for the demise of brick-and-mortar video stores is the movie-rental kiosks that are popping up like spring flowers on store parking lots.

“The rise of both Netflix and Redbox have sounded a death knell for the traditional brick-and-mortar video rental store,” said Mark Biggs, chairman of the Missouri State University media, journalism and film department, via e-mail.

An August 2009 study by market research company NPD Group said that while traditional store rentals still account for the greatest share of video rentals among U.S. consumers, kiosk rentals are growing at a greater rate than store rentals and even subscription services.

Bankruptcy bound
Movie Gallery Inc. operated eight stores in the Springfield area before the Wilsonville, Ore.-based company filed for Chapter 11 bankruptcy protection Feb. 2, according to www.moviegallery.com. The court-ordered reorganization plan is to liquidate and close 760 U.S. stores, the company said in a news release.

Following the closings, the company will operate 1,906 stores, including 1,111 Movie Gallery, 545 Hollywood Video and 250 Game Crazy locations. Additional stores likely would close during the Chapter 11 process, the release said.

Attempts to reach Movie Gallery Inc. for comment were unsuccessful but locally, staff at the West Republic Road store confirmed that the store is set to close, though no date has been announced.

Similar plans have been rumored for Blockbuster Inc. since 2009. Blockbuster closed 253 stores nationwide in January and has plans to close another 150 stores by April.

But Skip Phillips, Blockbuster district manager in Springfield, said the three remaining Blockbuster stores in town – 321 E. Battlefield Road, 1011 S. Glenstone Ave. and 1007 E. Kearney St. – are performing well.

“They’d be closed if they weren’t profitable,” said Phillips, whose employer, Fort Worth, Texas-based Midwest Entertainment Inc., holds the Blockbuster franchise rights in Springfield. “We’re locally owned and operated, so we don’t do the same things that corporate does.”

Streaming subscriptions
Statistics show consumer attention is turning to movie subscription services, most notably Netflix. The Los Gatos, Calif.-based company delivers movies by mail or streaming to computers, DVRs and Blueray players and gained 3 million subscribers last year to 12.3 million, according to www.netflix.com.

“Netflix changed the way America watched movies … with the subscription service launched in 1999,” said Steve Swasey, Netflix vice president of corporate communications.

Wall Street is in agreement with consumers thus far. Netflix stock (Nasdaq: NFLX) last week recorded a 52-week high of $89.10, and shares have gained 25 percent the past month, according to TheStreet.com. 2009 revenues grew 23 percent to $1.67 billion, according to federal filings.

Swasey said streaming movies are the way of the future.

“We’ve got a Ferrari going at full speed, we’re just going to tinker with the engine and change the tires,” said Swasey. “We’ve seen (video rental) stores, kiosks come and go. We believe the future is streaming, so we’re putting a lot toward that.”

Media professor Biggs thinks that’s a safe bet.

“The instant access without any hassle offered by Netflix makes this movie-viewing option extremely attractive to folks with high-speed Internet access or the need to hold on to videos for longer periods of time without having to pay additional rental fees,” he said.

According to www.blockbuster.com, Blockbuster announced an alliance in 2008 with NCR for vending, providing customers with another option for accessing movies and in 2009 announced alliances with TiVo, Samsung and Motorola to improve distribution, but so far, those moves haven’t been enough.

Blockbuster officials stated in a mid-March report to shareholders that bankruptcy was a possibility. Shares of Blockbuster (NYSE: BBI) plummeted to a 24-cent low last month from a 52-week high of $1.56 on Sept. 17.

The NPD study said that through the first half of 2009, video rental kiosks such as Redbox garnered 19 percent of video rentals; subscription services such as Net-flix had 36 percent of rentals and traditional brick-and-mortar stores maintained a 45 percent share.

If current kiosk-category expansion plans are implemented, NPD anticipates that video rental kiosks will make up nearly 30 percent of video rentals in the U.S. next year.

“The ease of being able to drop a Redbox disc off at many locations throughout town, plus the lower rental rate of $1 a night, makes Redbox attractive to folks who want to physically pick up a DVD for an evening of movie viewing,” Biggs said.

Posted by staff at April 20, 2010 03:06 PM