British Movie Rental Fortunes Tumble1 May, 2007 By: Erik Gruenwedel
The troubled movie rental business in the United Kingdom April 30 took another hit when shares of ChoicesUK — Britain's No. 2 movie rental service — fell more than 50% following the abrupt resignations of its founder, former CEO and CFO.
The Times of London reported that former chief executive Ian Muspratt and finance director John Sealey stepped down from the board, with Sealey continuing to serve as company secretary.
ChoicesUK's fortunes took a turn for the worse April 18 when the company warned it would “assess its strategic and financial options” after posting disappointing Easter sales.
The company blamed the downturn in part on unseasonably warm spring weather.
ChoicesUK has projected losses of $5.2 million through June, but analysts said losses would surpass $9 million. The company plans to sell or shutter 70 of its 190 retail locations.
The British brick-and-mortar movie rental business, under attack for some time from online rental services and piracy, earlier this year saw the liquidation of No. 3 rental chain Apollo Video Film Hire, in addition to store closures by No. 1 Blockbuster Inc.
With revenue-sharing agreements stacked in favor of the studios and distributors, and no first sale doctrine, which transfers distribution rights (sell, rent) of a lawfully acquired DVD to the purchaser — British independent movie rental companies have long dealt with a non-level playing field.
Rental stores that purchased titles at lower priced sellthrough (compared to rental wholesale) for rental could be subject to litigation.
“At the time, the indies in the country saw it as blatant move to try to put the rental market out of commission, and it kind of worked,” said one industry expert.
Since 2001, annual movie rental revenues in the United Kingdom have fallen from $937 million to $658 million.
ChoicesUK CEO Anthony Skitt told The Times that brick-and-mortar rental operations represented an endangered species.
“Clearly, standalone stores are becoming less viable,” said Skitt. “That's as plain as the nose on your face.”