Stable Rental Biz Offers Opportunity16 Oct, 2005 By: Kurt Indvik
For the past six weeks Home Media Retailing has been exploring the state of and future prospects for the rental business in our “Rental Revolution” series. In this week's concluding article, editor Stephanie Prange asks the straightforward question, “Does rental have a future?”
The answer is a decisive yes, but it's a future that will require traditional brick-and-mortar operations to evolve to meet new opportunities. While the series' first article showed that the subscription model has not penetrated the market much beyond Netflix and Blockbuster, that still is a market that shows growth potential of several billion dollars in the next five years, according to Adams Media Research. It's that growth that keeps the rental market at its current level of about $8 billion through 2010, according to Adams. The VSDA's Bo Andersen thinks independents should continue to explore that model and take advantage of their neighborhood presence to win local online renters over to their own rent- by-mail/home delivery services. New enterprises such as 24 Hour Video Store are appearing to address that challenge.
Rentailers also have an opportunity with new entertainment formats and platforms arriving on the market. While much hand wringing continues over the format battle between Blu-ray Disc and HD DVD, software pricing at the outset for these new high-definition formats (hopefully a single format) will be higher than traditional DVD, which should play well for rental dealers.
Meanwhile, the game rental business also might gain more traction for rentailers as the new Xbox, PlayStation and GameCube formats reach the market in the coming months. Again, this offers terrific opportunities for rental as prices for new console format games are likely to be higher. Hardware rentals also are an opportunity, especially as consumers try out the new consoles before making a purchase decision, though availability of hardware for rental businesses is a challenge.
Previously viewed title (PVT) sales, of course, have become a significant business, and 98 percent of respondents to a recent Home Media Research online survey said they're selling PVT.
In short, there is plenty of opportunity still in what will be a stable video rental business for years to come.