The Death of the Video Store

blockbusterstoreWritten by Ed Tellier

When I was a kid growing up, my family bought their first VCR in 1985. I was 8 years old. I’ll never forget the day as long as I live. I’ll never forget my grandfather renting 1980’s The Dogs of War. When the movie was over, he had no idea on how to rewind the tape back so we did it manually, going all the way back through the movie in reverse order. That whole experience awakened the movie buff in me. The convenience of being able to watch a movie at home without commercial interruption was quite appealing. As the 80’s went on, the popularity of VHS rentals exploded.

Stores specifically dedicated to this seemed to pop up everywhere. And those weren’t the only places to rent movies. Grocery stores and convenience stores were opening small sections stocked with the latest releases. At one point, there were upwards of a dozen video stores within 5 miles of here. On weekends, my grandfather and I would go from store to store renting as many movies as we thought we could get through over the course of the two days. Those truly were the good old days. As time progressed and technology moved along, video stores started to evolve. A lot of the smaller stores fell by the wayside due to the advent of the chain store.

How could a store run by two people, stocking 10 copies of new titles compete with what was essentially a superstore with hundreds of copies of the hot new titles? I remember walking into the newly opened Blockbuster Video and being amazed at the selection they offered. They had it all, even snacks and drinks to go with your rentals. As the mom-and-pop stores went out of business, the big boys were thriving. But then, in March of 1997, something came along that would change the game forever.

Digital Versatile Disc or DVD was touted by many as the next big thing. They offered better picture quality along with something that was almost unheard of in VHS tapes: bonus features. Now, you could watch the movie and see behind the scenes footage. Or listen to the filmmaker discuss the movie you were watching, as it played. And best of all, DVD movies were priced to own. Whereas VHS tapes often had an MSRP (Manufacturer’s suggested retail price) of over $100, most DVD’s were available to own for a fraction of the price. Instead of having no choice but to rent a movie, consumers were now given the option to own the movie. The chain stores maintained their VHS selection while offering a small selection of DVD’s.

Over time, as the DVD became more popular, stores started rethinking their strategies. The selection of VHS titles started shrinking while DVD sections got larger. In June of 2003, DVD officially took over as the dominant form of home video distribution. By this point, nearly all of the mom-and-pop stores had closed down. Here in my area, we were left with one small store along with a Blockbuster and Hollywood Video. While the video stores were attempting to capitalize on the success of DVD, one company knew what it wanted to do. Netflix started off as an online version of a video store back in April of 1998. They offered the convenience of a video store without having to actually set foot in one. In September of 1999, they started to offer a monthly subscription plan where you could get one movie at a time and send it back in exchange for another, paying per movie. In early 2000, they did away with the conventional video store ideas and switched to a flat fee system where you could rent an unlimited amount of movies from them per month for a set dollar amount.

Plus, there were no more due dates or late fees, like you’d have to deal with at a video store. What had started off as something of a niche was going to take off rather quickly from that time forth. In the fourth quarter of 2002, membership was reported to be at one million. By the third quarter of 2006, it had skyrocketed to 5.6 million. It was around this time that Blockbuster and Hollywood started to experience some major financial troubles. Why go to the video store and deal with the crowds and snotty teenage employees when you can get the movies right out of your mailbox? Why take a chance at the video store, hoping to find the hot new release, when you’re virtually guaranteed to get it without the hassle from Netflix?

Right alongside Netflix, another company sprang up called Redbox. Redbox is a DVD vending machine offering new release movies for a $1 per night rental fee. They offer many convenient locations like gas stations and grocery stores. And to make things more convenient, you can return your rental to any other Redbox location. While selection can be a bit limited, the price and convenience of it enabled it to become a quick success. In the spirit of competition, and perhaps seeing the handwriting on the wall, Blockbuster launched its own Blockbuster Online service. It was virtually identical to Netflix, just without the success. At the end of the third quarter of 2006, they had 1.5 million subscribers.

Definitely a far cry from the Netflix numbers. In the years since, Netflix has ballooned to 14 million subscribers whereas Blockbuster Online stopped reporting their numbers back in 2009. Throughout the years they have made so many changes to the service that I doubt if they even know what is going on with it anymore. They also launched a kiosk rental machine to compete with Redbox in the summer of 2009. However, numbers for that are unavailable. It is pretty widely reported that Blockbuster is on its last legs. Hollywood Video, on the other hand, made no real attempt to compete with Netflix, or even keep up for that matter. 2005 saw them bought out by a smaller competitor called Movie Gallery. Since then, their new parent company has filed for bankruptcy twice and has wound up closing thousands of stores in an attempt to just keep afloat.

News came out this week that all United States locations of Hollywood Video, Movie Gallery and affiliated Game Crazy would be closing their doors for good by the end of June 2010. Essentially, the shuttering of Hollywood Video and Movie Gallery stores signals the death of the video store as we know it. It’s terrible that so many more people will be out of jobs in this economy. However, this could have all been held off or even avoided completely had these chain stores opened their eyes and made serious attempts to give the customer what they want.

In the year 2010, most people want convenience and affordability. The last time I frequented Hollywood Video was back in the early fall of 2006. I’d often leave the store with eight to ten titles and nearly $40 less in my wallet. And I did that weekly. I signed up with Netflix on the four out at a time plan and get roughly the same amount of movies for about $25, including applicable taxes. Hollywood Video lost me as a customer when I realized how much they were really costing me. And honestly, I never looked back. I haven’t set foot in that store since. Based on this latest turn of events, I obviously wasn’t the only one.

Ultimately, only time will tell how much longer Blockbuster can go on for. I’d be pretty surprised if they lasted the year. But then, stranger things have happened.