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.

In what may be the most amusing (and ineffective) attempt at damage control, Hollywood movie studios are doing their best to minimize the “Twitter Effect.” What is the Twitter Effect? It’s the latest method movie viewers are employing via Twitter and other social media channels to get the word out on new movies. As anyone who follows box office receipts knows, if a flick doesn’t make it in its opening weekend, it’s damaged goods. This is especially true for movie franchise blockbusters, like Harry Potter or Star Trek. Prior to Twitter, studios could at least count on a few days of decent box bucks, even when the picture was a dog. With instant messaging, what took days for word of mouth to catch up to reality is now down to hours. “If people don’t like a movie on Friday, it can die by Saturday,” said Paul Dergarabedian, president of the movie-tracking firm Hollywood.com Box Offfice.

How much influence does the social media world influence today’s box office? The summer movie season is by far the most important period for the movie biz. As much as 40% of the annual box office receipts are generated during these three months, so strong openings are a financial necessity. Normally, a weak movie drops 40% in gate totals from week one to week two. This summer however, Twitter and other instant messaging systems have contributed to the average movie dropping a whopping 51% during the same time frame.

So how are the studios attempting to reduce the damage done by instant critics? Why by sending out their own tweets, supposedly from average moviegoers like yourself. They are texting quick one-liners about how great a new release is, regardless of the truth. Case in point – Bruno. While up-front buzz about Sacha Baron Cohen’s latest slag fest was huge, word of mouth via Twitter et al. revealed just how bad of a follow-up to Borat it truly is. Bruno opened with a respectable Friday, earning a total of $14.4 million. But by Saturday, its gate dropped 39% to a mere $8.8 million, hardly the kind of sales the studio expected. And it just got worse as word of mouth caught up to the Twitter effect. How many “bogus reviews” the studio tweeted to combat public opinion is unknown, but obviously they weren’t enough to overcome the legitimate tweets of unimpressed viewers.

Hopefully, social media channels will be one more iron in the fire for better movies. Hollywood needs more flicks with solid storylines instead of the CG studded special effects laden monsters that rule the summer theater fare. Movie studios would be wise to realize that in a free society, honest public opinion rules.