Dave’s Take

Like landlines, rotary-dial phones and 8-tracks, the neighborhood video store is going the way of the buggy whip. Once a cutting edge service, the video rental process has now evolved past mere brick and mortar to join other on demand services in cyberspace. Like nature, those who have adapted, like Netflix are booming; while those who cling to ancient business models, like Blockbuster are folding up their tents and turning out the lights.

Since their widespread proliferation in the 80’s, the video rental store has enjoyed a great run, but a run that is now drawing to a predictable conclusion. With Hollywood Video already in bankruptcy and Blockbuster preparing to file, the days of driving to the store for a movie are coming to an end. Services like Redbox and On-Demand are forcing the closure of thousands of video rental storefronts, nationwide. Hollywood Video has already closed over 800 of its stores and now Blockbuster has announced it will close 500 of its 3,500 stores this quarter. As for the rest of their locations, industry experts know it’s simply a matter of when and not if they are all going to close.

In retrospect, do the honchos of Blockbuster and Hollywood wonder where it all went wrong? Do they ponder the possibilities of “what if” in regards to their failure to adapt to the technological evolution sweeping the industry? Who knows, but what is obvious is that their hubris has resulted in a one-way trip to death row. After all, who wants to drive a mile to a store to rent a single movie for a week? Not many, as evidenced by recent industry stats that show store front video shops add up nationally to a mere 45% of the video rental market. Subscription services like Netflix control 36%, with kiosk-based systems like Redbox holding on to the final 19% of rentals.

Desperately trying to delay the inevitable, Blockbuster has announced its intention to remain in the game by installing as many as 10,000 Blockbuster Express kiosks this year alone. They are also trying to update their business model by starting a streaming on-demand service like Netflix. In addition, they are cutting deals with the studios to get DVD titles like “Sherlock Holmes” and “The Blind Side” 28 days before Redbox or Netflix gets them. While a step in the right direction, I find it doubtful they will succeed. The movie rental boat has sailed and Blockbuster is still sitting on the dock. They seem to have forgotten the most basic of business principles – adapt or die.