Issue 39.11
In 1981 I started a business that hardly anyone had even heard of – a video rental store. As a sideline I also rented, sold and repaired computers. The videos were VHS and I had to rent VCRs with them since nobody owned video players yet. The computers were Atari 400s and 800s and Commodore 64s. It was a fun time and was pretty successful. A few years later I decided to sell the video part of the business and eventually focused full time on computers. It has been interesting to watch how things have changed since then.
Within a few years, video stores were everywhere and large national chains developed like Hollywood Video and Blockbuster. There were many mom and pop stores like mine as well that were able to do a good business. The broad availability of movies and inexpensive players helped develop the home video market very rapidly. The drop in price of movies made them accessible even to families that had little money to spend. I remember paying $120 each wholesale for the first Star Wars movie when it came out on VHS. Today, you can buy the whole collection of 6 movies (plus a ton of additional material) on Blu-Ray Discs for around $70. In the meantime, the large chain rental stores and most of the mom and pop rental places have disappeared. To find the reason, you only have to look at a new technology and two new marketing plans. The combination of these two innovations has changed the rental landscape completely.
The new technology is video streaming. Now that internet speeds have increased sufficiently to bring movies into your home without a large loss of quality or the annoying stop and start experience when watching movies online began, it is a viable and enjoyable way to pick out something you want to watch and see it immediately without having to go anywhere and hunt for it. Netflix has pioneered this and is currently the largest provider of online movie and tv show content. Others like Blockbuster, I-Tunes, Amazon and now Dish Network are trying to grab a segment of this very lucrative market. Some offer a pay-per-view type plan where you pay for each program you watch, but most have monthly plans at minimal cost with which you can watch movies and shows every day if you so choose. With the recent change in Netflix (increasing prices and moving their mailed DVD business to a new company called Quikster), the other players are working hard to woo unhappy customers away and are having some success doing so.
The marketing plans include Netflix (mentioned above) which has been mailing DVDs to the user quickly and efficiently and Redbox which uses automation to rent DVD’s cheaply at convenient locations like fast-food restaurants and grocery and convenience stores. They typically rent movies for $1 per night but are limited to mostly recent releases. They are now adding Blu-Ray Discs and Video Game rentals for a slightly higher price.
All of these innovations have made it next to impossible for the existing video stores to survive. The lone exception I have seen is the video stores that carry a large inventory of older movies in addition to a good selection of new releases. These stores seem to be hanging on, but are not as profitable as they once were. I’m glad they are still around though, because I think the older movies are often much better than the new ones. I recently watched Charade with Cary Grant and Heaven Knows Mr. Allison with Robert Mitchum.
Shaun McCausland has worked in the computer industry for over 30 years, 20 years of it locally with Bits ‘N’ Bytes and Musicomp and currently does in-home and on-site computer consultation,