The Randomness: DVD Killed the Video Store (…sort of)

Yesterday I discovered that another nearby video store is closing down. I can’t shed too many tears; it was a national chain to which I held little affection. (Hollywood Video, for those keeping score.) But the sad fact remains: a single Blockbuster Video is now the only video store within, I dunno, fifteen, twenty miles of my suburban home. The closest other video store is… another Blockbuster. They’re the only ones left, and the way Blockbuster’s been in a state of steady decay for the past decade, I expect those won’t be around this time next year. The number of independent video stores in the Greater Cincinnati area, I can count on one finger – but it’s a good forty minute drive (at best) from my corner of town, making a quick trip to rent “Pokémon 2000” for my daughter out of the question.

Clerks - Randall
As I said, I don’t lament the death of Hollywood Video, and I’ll accept Blockbuster’s demise with a shrug. But discovering the closing of the area’s final rival to Big Blue got me thinking of the downfall of the video store. This is an industry that’s turning out to be remarkably short lived, exploding with the rise of the video age, only to spend half its life imploding. A great number of factors are to blame, naturally. But a single thought keeps swirling around in my brain: DVD killed the video store.

It did not act alone. And in many ways, it helped as much as it hurt. But still. DVD killed the video store. Here’s how:

In the late 1990s, most VHS titles were still being released under a rental pricing system that had been in place for nearly two decades – a single cassette would originally retail at a hundred bucks, give or take, ensuring the public could only access them via rental shops. There were exceptions, of course; Disney always offered affordable “sell-through” prices on their titles on the same day their titles were available to rent, a marketing plan that worked so well other studios followed suit with kid movies and other “event” films. (“Own ‘Independence Day’ now!”) For the most part, though, customers had to wait an average of six months after a new film was released to rent before it would be re-released at sell-through pricing for public purchase.

The downside to such a pricing structure is that stores had to shell out a considerable investment on every tape they carried. (Granted, they rarely paid full retail when ordering from distributors, but even at wholesale it was a sizable chunk of change.) A store would have to rent out a title around a dozen times before turning a profit. The upside, however, is that stores would keep inventory longer, building hefty libraries of back catalog titles. Older titles retained their value long after being pulled from the new release section.

Then came DVD. Aside from improved video and audio quality and storage space for supplemental material, DVD’s biggest selling point was its price. There would be no rental plan – the studios agreed all discs would be sold to the public immediately.

This was a boon to the mom-and-pop shops that found it increasingly difficult to compete with Blockbuster, which had Wal-Marted its way into the industry with the single goal of pushing all competition out of business. (Perfectly reasonable from a bottom line perspective, sure, but also, you know, totally evil. And yes, it’s perfectly reasonable to say Blockbuster did more to destroy the rental industry than DVD; most indie stores were gone before discs came on the scene. But work with me here.) By 1997, Blockbuster had grown into a beast with so much clout it could arrange cushy revenue-share deals with studios, who offered Big Blue lower prices on new release titles bought in the sorts of quantities smaller stores could never reach. (I use Blockbuster as the main example, but it’s hardly the only culprit.) But with DVD, independents – those that hadn’t been driven out of business, anyway – found themselves on equal footing with the chains. Investment costs were lowered. VHS soon followed, with studios eventually reducing the number of tapes still offered under rental pricing. The rental industry was saved.

Except, well, not really. The same lower prices that made DVD so attractive to rental shops also caught the eye of customers themselves. Affordable discs – especially after average prices dropped very quickly, settling to a retail price of $10-20 for a new release after only a few years – now meant home video libraries were no longer merely the domain of obsessed collectors. Anyone could have their own mini-library. Heck, they could do so without ever setting foot in an actual specialty shop; a trip to the grocery store could do the trick just fine.

(Yeah, grocery stores also offered sell-through VHS titles, but those were usually the “event” films in limited selection. The rise of DVD gave us a culture of ownership that led to stores displaying discs right next to the tabloids and the gum as an impulse buy – and they could even deal in library titles without any sizable loss.)

More people buying meant less people renting. Why spend five bucks to borrow “Ocean’s Eleven” for a couple days when for a few bucks more, you could keep it forever?

Of course, not everybody thought this way. Some folks still liked to rent, not feeling the need to clutter their homes with movies. But little by little, they found their local rental shops wanting.

Chain stores share the blame for this next bit, since mom-and-pops – the good ones, anyway, although at this point the good ones were the only ones left – generally still valued a well-stocked library. (Note that almost all surviving independent stores cater to a more eclectic clientele, customers more interested in hard-to-find films than in the big summer hits.) Then again, what the chains did to their libraries was also done in several indie stores.

Namely, in the eyes of management, libraries lost their value. Buying DVDs at wholesale meant a store needed to rent a title only two or three times (and sometimes only once) before turning a profit, which in turn meant there was no longer a reason to hold on to a particular title if its investment had been covered but it was no longer renting steadily enough to warrant shelf space. Used discs began being sold earlier and earlier after their initial release. This is especially true in larger chains, where a hundred copies of a single movie had been ordered – no need to clutter up the place with a disc waiting to be rented if that same disc can be sold right away.

This, then, led to a greater sense of urgency and disposability: get ’em in, rent ’em a few times, then dump ’em fast. Didn’t matter if it’s a major Hollywood title with a hundred copies on the shelf or an imported art house flick with just one copy available. If it’s not renting steadily, it has no place on the sales floor.

Again, this makes perfect sense as a business model, maximizing profits and reducing dead weight. But it’s also woefully impersonal, assuming every customer wants the same thing, and they only want it when it’s brand new. As a film buff, it’s a slap in the face.

What did this mean for the library titles? Some of them got to stay, sure – the chains had already figured out which older fare rented frequently enough to stick around – but the rest became useless to them and got sold off on a regular basis.

This gave many renters less and less of a reason to visit. The latest “Spider-Man” movie might be “guaranteed in stock,” but what if I’m in the mood for something smaller, less known? Or maybe one of the hundred of classics that don’t rent with predictable frequency? Suddenly, customers were finding less variety every time they shopped.

Enter Netflix.

OK, so Netflix entered the market before “urgent and disposable” became the mantra of the chains. But they really started to grow right around the time chain stores were beginning to lose their appeal. Free from the limited confines of a brick-and-mortar shop, Netflix could carry anything – everything – without management worrying if the shelf space was going to waste.

There had been video rental services before, but none fully worked, thanks to the clumsy shipping methods (and high cost) required to send and receive VHS tapes. DVD made sending movies through the mail simple for both retailer and customer. It helped, of course, that Netflix was run by people who knew what the hell they were doing, and that their no-late-fees model was attractive to the public (so much so on both counts that Blockbuster’s pretty much run themselves into the ground trying to keep up). And while the troubles Netflix has in making its customers wait for new releases is no change from the same troubles video stores had, their ability to carry just about everything, no matter how obscure, became just as attractive to customers as their simple subscription model.

Factor in Netflix’s aggressive marketing and strong customer service, and it wasn’t long before customers were choosing rent-by-mail over trips to the chains in droves. (Their online streaming only adds to their arsenal.)

They weren’t the other competitor. Originally owned by, of all companies, McDonald’s, Redbox figured out how to make kiosk renting – essentially owning a video store without the hassle of employees and real estate – a viability. Using the same limited space/weight convenience that made DVDs to easy for Netflix to ship, Redbox made it easy for customers to more or less rent their own movies. When Coinstar, a company that figured out how to make money off of people wanting to get rid of pocket change, bought the company, they expanded with a fury (so much so that Blockbuster wasted a few years trying to keep up with them, too).

There are drawbacks to Redbox’s model; namely, inventory must remain limited. Their solution was to focus heavily on new releases – to essentially be the anti-Netflix. For many renters (like myself), they’d save Netflix for older/rarer titles and use the local store for the new stuff. With Redbox filling the latter’s role, the need for Blockbuster decreased even more. All you need now is a trip to mailbox and the gas station (or wherever your Redbox is).

Both companies rose to power on the strength of DVD. Blockbuster failed because of DVD. Mom-and-pops went out of business because of Blockbuster. OK, so it’s two out of three for my theory – and that’s not even counting the internet, which made it so darn easy to ditch physical media completely. So no, DVD didn’t kill the video store. But yes, it did. Sort of.

Clerks - Ooh, Navy Seals!

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