Professor Sherry Jarrell "can't imagine traditional video stores making a comeback"

Don’t count video stores out yet

Originally Posted on Sunday, December 20, 2009 | by Tim Clodfelter
Reposted from The Winston-Salem Journal

Changes in the video industry have led Carol Baker to diversify the offerings at her store, King Video Station in King, in recent years.

“We’re still hanging on,” she said. Her store, which began renting videos back in 1983, added tanning beds eight or nine years ago, and also sells lottery tickets and acts as a payment center for Duke Energy.

“We’ve had to add those things in order to compensate for the loss of video sales,” she said. “For the ones who have ample space, it just makes a good mix.”

But she is looking forward to the holidays, saying that winter is traditionally a busy time for video rentals.

“During the vacation period between Christmas and New Years’ is a good rental period,” she said. “Until that, though, everybody is busy shopping.” Her store also sells gifts cards during the holidays.

If independent video stores are struggling, it’s because there are almost too many options available to consumers.

Once upon a time, the only way to see a movie on your schedule was to drive to the local video store. Now, you can rent movies by mail or watch them in streaming video online or through a device that connects to your TV set. With Redbox, you can rent the movies from a vending machine, many of which are at the front of grocery stores and large retail stores. Cable and satellite have video-on-demand options that offer the latest hits and catalog titles. And many public libraries offer videos for free.

But don’t count video stores out just yet, said Shawn DuBravac, the chief economist and director of research for the Consumer Electronics Association.

“I don’t necessarily see them going away, but their business models are evolving,” he said.

Changing times

The NPD Group, a market research firm, found that video rentals from traditional brick-and-mortar video stores accounted for 47 percent of the rental market between January and October, down from 63 percent in the same period of 2008. Rent-by-mail was 28 percent in 2008 and 33 percent this year; vending machines grew from 9 percent in 2008 to 20 percent this year. The study did not include video-on-demand options.

Video rentals from all sources have declined from a peak of $10.4 billion in 2001 to $8.2 billion in 2008. But the numbers are back on the upswing, said Denis Cambruzzi, the vice president of corporate development at Adams Media Research.

In 2001, traditional video stores accounted for the majority of rentals, with $10.3 billion. That figure dropped to $5.5 billion in 2008.

A report from Adams Media Research found that in 2009 there are still more than 19,000 stores nationwide that specialize in video rentals, a number that declined by more than 3,800 between 2001 and 2008. The number of nonspecialty stores that included video-rental departments, such as grocery stores, fell much more sharply, going from more than 17,000 in 2001 to just 712 in 2008, many of them closing their departments and leasing space to vending machines.

“We’ve seen a tremendous amount of innovation in delivering video to consumers just in the last two years alone,” DuBravac said. “There are different pricing models, delivery methods, and you can pick it up at a convenient location.”

Blockbuster, for instance, added a rent-by-mail service several years ago and is installing vending machines around the country. By the end of 2009, the chain will have 2,500 machines nationwide; by the end of 2010, that number is expected to expand to 10,000, according to Michelle Metzger, a spokeswoman for Blockbuster.

Blockbuster also offers video-on-demand through TiVo and some Samsung devices. But the company remains devoted to brick-and-mortar buildings.

“There’s still something to be said for the family ritual of going to the video store to rent movies,” Metzger said. “We still have over 3,000 stores here in the U.S.”

Independents to chains

In the 1980s, there were a number of locally owned video stores in the Winston-Salem area, such as Action Video and Video Village. Over time, national chains such as Blockbuster, Movie Gallery and Family Video moved in, drawing away their business. Now, only a handful of video stores, most of them chains, remain.

And even the numbers of chains are dwindling. One of Blockbuster’s Winston-Salem locations, on West Clemmonsville Road, closed this year. Another, at North Point, is in the process of closing, selling off its inventory and moving employees to another location.

Kaisha and Kelvin Jones of Winston-Salem were loyal customers at the North Point Blockbuster.

“We’re movie fanatics,” said Kaisha Jones as she browsed through the used DVDs on sale at the store. “We have small kids, and it’s expensive to go to a movie theater.”

She said they have tried Blockbuster’s online rent-by-mail service, but found that they were coming into the store more often.

“They have real nice clerks giving customer service,” she said. “And you run into friends while you’re here. I’m still a people person.”

They use Redbox as a backup, but, Kelvin Jones said, “There’s more of a selection here.”

They plan to switch back to Blockbuster Online, but said that they would miss the store.

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Rent by box

Redbox, which started in 2004, focuses more on the current hits, with each kiosk holding 150 to 200 titles. The kiosks are found in more than 17,500 locations nationwide, including Wal-Mart, grocery stores and McDonald’s. Rentals cost $1 a night.

According to a company spokesman, Redbox rents more than 1 million DVDs each day. Though most of its titles are new releases, the company says that it does carry some popular classics and children’s titles in response to customer feedback.

Laurie Hardin, a Winston-Salem resident, said she frequents Redbox machines at Harris Teeter stores, combining trips to the grocery store with video runs. She has been using Redbox for six months and uses an online option that lets customers reserve titles before they come in the store.

“I love it,” she said of Redbox. “If they ever took it away, I’d be heartbroken.”

Sherry Jarrell, who teaches economics and finance at Wake Forest University, said she can’t imagine traditional video stores making a comeback.

“Brick-and-mortar stores are having an uphill battle,” she said. “It’s so convenient (online). The availability is higher online and the costs are lower. Once people switch, they never go back.”

Jarrell doesn’t use Net­flix or Redbox, but goes with another option: She buys most of her movies rather than renting them. “I don’t like the hassle and late fees,” she said. “I have a big collection, and we like having them and being able to re-watch them.”

Plus, the more times that she watches a movie, she said, the more cost-effective it is to buy it.

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