Renting revolution
Netflix, Redbox move in on traditional video storesBy CHRISTOPHER KROMER / Tribune Chronicle
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Long, long ago (in technology terms), in the waning years of the 20th century, consumers searching for video entertainment usually had a single destination. A trip to the local video store was often all that was needed to assuage one's entertainment appetite.
But as technology continues to advance, consumers are faced with more video choices, a development that has traditional video stores reeling.
''The store count is decreasing,'' said Eric Wiener, an analyst at Adams Media Research in Monterey, Calif. ''Traditional stores have been going more to game rentals and sales.''
Subscription services like web-based Netflix and kiosk outlets like Redbox are the two developments currently driving market forces, said Wiener.
''They're more convenient for customers, and they are a better price value,'' said Wiener.
Convenience and value are both primary considerations for Faron White of Warren, who says he uses Redbox self-serve rental machines once or twice a week.
''It's cheaper than the video store,'' said White, who says he likes being able to rent new movies for $1 a night.
With more than 8,000 locations across the country, Redbox's self-serve rent and return system emerged from humble beginnings, according to Gary Lancina, vice president of marketing for Redbox.
''The concept of Redbox originated from a small team within McDonald's that was challenged to find new ways to drive traffic to the restaurants and make McDonald's even more relevant for customers,'' said Lancina. After a few years of testing, Lancina says the Redbox concept took shape.
''It was through this testing that Redbox landed on the current value proposition of $1 per night, all new-release DVD rentals, with rent-and-return-anywhere capability.''
Each Redbox kiosk holds about 200 recent movie releases, Lancina said. Charges accrue at $1 a night and, if the customer chooses not to return the DVD after 25 nights, the customer can keep the DVD, Lancina said.
Another popular option for movie-seeking consumers is Netflix, an Internet-based video service featuring by-mail DVDs as well as streaming video service. Boasting a library of more than 100,000 titles, Netflix has made a significant impact on the movie industry, says company spokesman Steve Swasey.
''Netflix changed the way Americans rent movies,'' said Swasey. ''Before Netflix you had to go to stores with lousy service and punitive late fees.''
According to Adams Media Research, Netflix posted $1.2 billion in revenue last year and amassed 7.3 million subscribers.
The combination of kiosk and Web-based services makes it hard for traditional video rental stores to compete.
''It's not going to do away with traditional rental stores, but fewer and fewer people are using traditional rentals from traditional stores,'' said Wiener.
Part of the solution, says Randy Hargrove, spokesperson for Blockbuster, is to modify provision of existing services while adding new offerings.
''I think with our brand, it gives us the ability to change with changing times,'' said Hargrove, who said the company's mission is to provide convenient customer access to entertainment ''however, whenever and wherever customers want it.''
Founded in 1985, Blockbuster has weathered other market changes in the past, said Hargrove. Weathering changes in how people access movies-from VHS and Beta tapes to DVDs and BluRay DVDs-has allowed Blockbuster to grow, said Hargrove.
''We continue to evolve as a company to continue to meet customer demand. It's been an ongoing process and will continue to be.''
Blockbuster has also broken into the Web-based streaming media business, following its August 2007 purchase of Movielink.
Blockbuster operates a by-mail rental service that allows customers to return movies to a Blockbuster store or send them back via mail. Other services, including video game and console rental and a greater focus on retail sales, represent an evolution in Blockbuster's offerings.
''With digital growing, we see opportunities there,'' said Hargrove.
