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TK's MORNING BUZZ: Why Does This So-Called 'Dying' Business Continue to Generate So Much Money?

By Thomas K. Arnold | Posted: October 23, 2000

Imagine what the video rental industry must look like to an outsider.

In the last few months, two big public video chains, Video Update and Video City, filed for Chapter 11 bankruptcy.

Top video specialty chain Blockbuster Inc. saw its stock price nosedive to below $7 a share, less than half its IPO price, while the second-biggest chain, Hollywood Entertainment Corp., lost a significant chunk of its share price in a single day.

A respected industry analyst, Paul Kagan Associates, declares video rental is "dying," while reports that only about 100 independent video stores are going out of business each month are greeted as good news.

Through all of this, however, the mainstream media has been strangely, oddly, inexplicably silent. I remember back in early 1997, when video rental revenue was off a few percentage points from the year before. We immediately saw a barrage of stories in the financial press, calling video stores "dinosaurs" and insisting that the end is near.

The same doom-and-gloom stories followed every other crisis, real or perceptual, this industry has faced almost since its inception, from the video-on-demand threat posed by the telco mergers of the early 1990s to the arrival of the Internet a few years later.

The mainstream press' silence in the midst of what just might be the biggest crisis this industry has ever faced--and from it may never recover--could be due to a number of factors.

It could be they've already written us off for dead so many times that they figure one more crisis--one more nail in the coffin?--is old news.

It could be they just don't care. Let's face it--our problems are very real to us, but they're nowhere near as sexy as, say, the bursting of the dot-com bubble or, for that matter, the promise of DVD and video streaming.

Or it could be--and this is the worst scenario of all--that they're just holding their breath, like many of us are, and waiting for the other shoe to drop. Why waste ink on writing about the ailments of a sick patient when you can cover all that and more in the obituary?

And yet, despite all the setbacks video rental has suffered in the recent past, it is still a mighty industry generating more than $9 billion in annual consumer spending. Overall rental revenue is down, but only by a few percentage points. In fact, with all the obstacles it is facing, both from the outside and from within, it's somewhat remarkable that this "dying" industry is still generating so much money.

But I guess that's not a sexy story, either.

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