And Then There Were Two29 Mar, 2004 By: Stephanie Prange
Hollywood Entertainment's move to go private may have many motivations — not the least of which is a stock jump — but it also highlights the troubled relationship video stocks have with Wall Street.
Hollywood's stock has taken a beating, as have other public video chains, based on worries about the ephemeral nature of the rental business, which has, since its inception, been under attack from competing interests that want a bigger piece of the home entertainment pie.
Never as sexy as video-on-demand or online rental upstart Netflix, the rental chains have only been temporary havens for Wall Street until the “future” arrives. In my tenure at Video Store Magazine, video retail stocks have been variously characterized as profitable and solid businesses in a sea of promises to the outmoded buggy whip. As the future technologies go, so doesn't go video rental. If VOD is hot, video rental is not. If VOD is a far-off pipe dream, video rental is a good solid business.
The even-more potent and immediate threat of DVD sellthrough has taken a toll on video rental stocks as well. If Wal-Mart sells a title for as low as $5.88, why would anyone rent?
Whatever the reality of the situation, Hollywood going private and Viacom washing its hands of Blockbuster by spinning it off shows Wall Street's affair with video rental chains may be off again.