End of an era

MITCHELL, S.D. — For residents here and people across the nation, the days of heading to the video store to pick up a movie could be fading into the past.

Movie Gallery was the only national chain video-rental store in the city when it shut down March 29. Coborn’s Video — inside the Coborn’s grocery store — is now the last video-rental store in Mitchell.

The increasing popularity of cable video-on-demand, Netflix mail and online services, and the Redbox kiosks outside Walgreens and Walmart are forcing out retail chain stores.

In Movie Gallery’s case, the parent company also had filed for bankruptcy in February, liquidating several Movie Gallery, Hollywood Video and Game Crazy stores that weren’t profitable.

The way that consumers get their entertainment has been changing the business model for video-rental stores for the past 20 years, said Bryan Hisel, Mitchell Area Chamber of Commerce executive director.

He cited Internet access, and computer and cable television as examples.

“It’s a very dynamic process in terms of the way you can get movies on TV at home,” Hisel said.

Nationwide trends

Nationwide, there is a place for all types of deliery methods in the video-rental market with stores, online subscription services, kiosks and video-on-demand, said Grace Lee, of The Entertainment Merchant Association in southern California.

“Some will be attracted to the many copies, ease of browsing and customer service available at a brick and mortar store,” she said. “Others will welcome the low price and convenient locations of kiosks. Some will appreciate the depth of selection and ‘all you can eat’ pricing of online subscription services.”

Despite the variety of services, Lee maintains that video-rental stores are not disappearing anytime soon. She noted that the stores still have the largest share of the retail market and said they will continue to maintain that status for the foreseeable future.

“Many consumers appreciate the large selection, numerous copies, customer service and ease of browsing that are available at their local video store,” she said.

In 2008, publicly traded chain video companies had the highest video-rental market share at 35 percent, followed by other video stores at 33.9 percent, online rental at 24.7 percent, kiosks with 5.9 percent and supermarkets with 0.2 percent, according to the EMA’s 2009 annual report on the home-entertainment industry.

Yet, Adams Media Research projects in the same report that traditional rental businesses will continue to lose market share.

For example, traditional rentals are projected to make up only 45 percent of consumer spending in 2013, with subscription video rentals at 37 percent and kiosk rentals at 17 percent.

“The video business is in trouble, not because movies are not popular, but because of the economics of it,” said Jeff Logan, president of Logan Luxury Theatres Corp. and a former owner of video stores.

Local history

The local video rental industry was bustling in the 1980s and ‘90s. Several independent stores and other stores folded into supermarkets could be found throughout the city.

One of the last local stores other than Movie Gallery — Mr. Movies, in what is now Carquest on Main Street — closed about three years ago, building owner Ken Blaalid said.

Logan once operated two video stores — Showbiz Video near the theater that was then on North Main Street, and Showbiz Video South on Sanborn Boulevard.

He opened the main store in February 1985 and the second one in the early ’90s. When more south-side customers flocked to the north store because of a better selection, he closed the south store in the late ’90s. Liberty Tax Services is now in that building.

When satellite and cable television started offering pay-per-view in the late ’90s, Logan saw the path that video-rental stores were headed down.

Even though business was still strong, Logan closed Showbiz when the lease lapsed.

“I was just lucky enough to get out when there was still a little profit,” he said.

Mitchell Telecom introduced video-on-demand to its cable service in late 2006, with a platform for providing locally produced content.

Home basketball and football games for Dakota Wesleyan University and Mitchell High School have been broadcast through a partnership with The Daily Republic, along with 2008 presidential campaign visits by Hillary Clinton and Barack Obama.

About a year or two later, Subsidiary Manager Scott Peper said he saw the popularity of that service surge because it gives customers the chance to watch a movie 24 to 72 hours from purchase and to pause, rewind or fast forward scenes.

“Ours was more of an impulse buy,” he said of consumers’ choice for video-on-demand. “Others looked at video stores as date night, ‘let’s get a movie.’ ”

Looking ahead

The challenges for video-rental stores have been accelerated more by the advent of Netflix than cable’s video-on-demand, Peper said.

Netflix is now the world’s largest subscription service, streaming movies and TV over the Internet and sending DVDs by mail to at least 12 million members, according to its Web site.

Redbox is attempting to imitate the video-rental store model with less overhead by offering movies for $1 a day at kiosks at various stores. The red kiosks are available locally at Walgreens and Walmart.

“If you can rent something for $1 a day, it seems like a game changer,” Peper said.

However, Peper said video-on-demand and Netflix will appeal more to consumers because they don’t have to physically return their purchase.

Now Redbox is asking its customers to rate their interest in low-cost video streaming at $3.95 per month in a survey to compete with Netflix, according to PCMag.com. Customers would have access to unlimited movies online and four free kiosk rentals.

Video rental stores also are trying to stay current by embracing new forms of rental, with some offering their own kiosks and online subscription services, Lee said.

Despite the changes in the industry, Coborn’s has no plans to discontinue its video-rental service, said Steve Gottwalt, Coborn’s director of communications and consumer affairs in St. Cloud, Minn.

“We are seeing changes in the business nationally and locally in how they (movies) are being delivered,” he said. “We have certainly seen that impact on our business. We are in this business for the long-term, and we will continue.”

Because Coborn’s offers movies as a service and not as a primary function of their business, Hisel thinks the video store will be a mainstay.

“It draws customers to a particular product, store and brand,” he said.

Melanie Brandert is a reporter at The Daily Republic

in Mitchell, S.D.,

which is owned by

Forum Communications Co.

Tags: us business, movie gallery, business, video, rental