DVD Killed the Video Store

Your local movie-rental store, marked for death?

Soon businesses will spring up to "resurface" damaged DVDs, Becker predicts. And if the format is difficult to rent, it's pointless to own: Most consumers don't watch movies again and again the way they listen to CDs.

Still, the video arm of AOL Time Warner is aggressively pushing the DVD as something to buy. According to Adams Media Research of Carmel, California, last year's sales totaled $12.26 billion, while rentals came in at $9.92 billion. At their current low prices, DVDs don't cost much more than my girlfriend's late fees, anyway. And unlike the old days of VHS sales, there isn't a "window" for rental shops before videos go on sale: Now you can buy a DVD the same day it becomes available for rental (though Blockbuster is lobbying the studios to change that).

"DVDs have ruined us," summarizes a former Mr. Movies franchise owner in the northern suburbs, who prefers not to use his name. "The plan going forward has been to sell DVDs new and compete with Wal-Mart. But that's just not practical for a small franchise."

If 'Beethoven' and 'Benji the Hunted' aren't back on the shelves, I'm going for the jugular: Nicollet Village Video owner Chris Becker and his staff late-fee collector
Michael Dvorak
If 'Beethoven' and 'Benji the Hunted' aren't back on the shelves, I'm going for the jugular: Nicollet Village Video owner Chris Becker and his staff late-fee collector

In this dicey environment, rentals slipped 3 percent in 2002. And as I write, the comedic void known as Sweet Home Alabama is being heavily advertised in endless TV spots as a Valentine's gift. But somehow, I suspect those stuck with that DVD will wish they had rented.

The real question is, are stores going the way of VHS? Amid an explosion of alternatives--satellite, broadband cable, pay-per-view, illegal copies on file-sharing services like KaZaa--Netflix now offers an Internet-based rent-by-mail DVD service that Blockbuster has been forced to imitate. Last April Netflix opened a local distribution office in Minneapolis, and reports mailing 100,000 DVDs a month.

But Becker scoffs at the idea that online services could replace brick and mortar. "How close is the future where every title in here is available through a couple of mouse clicks?" he asks. "For that digital future that everybody says is coming, everybody's going to have to accept the model that Blockbuster is trying to push, the idea that only 500 films came out last year."

In point of fact, more than 750 films came out domestically in 2002, not counting many festival entries. But I can't help wondering: How will even the most dedicated shops carry them all?

 

If you want to know whether independent video stores are dying, ask the guy who picks over the corpses. Vil Vilinskis has been in the business of buying and selling rental inventories since 1985. Back when he got started, it was a boom time for small shops.

"You only had to have maybe 15 'turns' [or rentals] and you were making money," he says. "New releases would stay on the 'new release' wall because the demand was high and the supply was low."

The result was too many businesses. "It was like the '50s, with the gas station on every corner. Pretty soon the ma-and-pas started to feel the squeeze."

Enter Blockbuster, the Exxon of video rental. Co-founded by a Florida garbage magnate and eventually scooped up by Viacom, the company was ruthless with inventory, forever ditching the old model of keeping one copy of every release for future rentals. The logic: Why rent Meatballs once a year for 99 cents when you can sell it to a wholesaler for five bucks?

Blockbuster grew so powerful that it began making revenue-sharing deals with major studios, which allowed the company to carry more than a hundred copies of each title in stores with no acquisition costs. Other chains struck up their own agreements. But independent video stores were shut out. (The arrangement has become the subject of an anti-trust lawsuit against Blockbuster, filed in Los Angeles Superior Court on behalf of 250 independent video stores.)

Still, you'd think the DVD era would help independent stores capitalize on their strength--namely, still having one copy of everything. A shelf without 8,000 copies of The Wedding Planner is a shelf with room for good movies, right? But despite DVD's potential for opening the cinematic vaults, studios are slow to replace old films on VHS. "They're putting it out so piecemeal, it's going to take 20 years to get all this catalog on DVD," says Scott Prost, who owns Video Universe in Robbinsdale.

Vilinskis sees the back end of this dynamic. "I just bought out two independently owned Video Updates in the Twin Cities," he says. "On the new-release rack, DVDs represented 60 percent of the product, and VHS was 40 percent. In the catalog section, it was 98 percent VHS and about two percent DVD."

What kills stores is having to pay the same old high prices for tapes--maintaining an expensive back catalog while trying to compete in new stuff. Prost says most small operations don't have the capital for that, but he's managed by taking it slowly--there are now 5,000 DVDs among his 30,000 titles. In addition, Video Universe is buoyed by the one market (besides imported films for immigrants) that the chains can't seem to conquer--pornography.

Remember, porn is the reason VCRs exist in the first place--buyers pushed the technology at every step of development. Now enthusiasts make use of an arcane feature of some DVD players that lets you view scenes at multiple angles. The My Plaything series (with Jenna Jameson and others) allows viewers to choose what they want the star to "do," pushing movies into the realm of the video game.

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