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College Town Reaches Movie Rental Divide

15 Mar, 2011 By: Erik Gruenwedel

Blockbuster Express kiosk

The shuttering of another Blockbuster store shouldn’t warrant much attention these days amidst the corporate parent’s aborted bankruptcy, and last year’s demise of the Movie Gallery and Hollywood Video chains.

Then again, this month’s exits of Blockbuster and independent 49er Video in Davis, Calif., leaves a college town of more than 63,000 residents (including nearly 30,000 students) without a singular brick-and-mortar outlet for movie rentals.

While there are six Redbox locations and two Blockbuster Express kiosks within the city limits, neither carry new releases from three major studios Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment due to the studios’ 28-day embargoes. And the likelihood of finding a Disney title for a $1-per-day on street date diminished significantly last month after the studio upped wholesale prices to kiosks and Netflix.

“People are spending a lot of time on the Internet doing a lot of different things, including watching videos,” said Phil Leigh, analyst with Inside Digital Media in Tampa, Fla. Leigh paraphrased science-fiction writer William Gibson, saying the future has already arrived — it is just not evenly distributed yet.

“That’s what you have in Davis: We are seeing the future,” he said.

Leigh joked that the only person incapable of getting a movie off the Internet in Davis was likely his brother, an economics professor.

“But he’s got three kids, and they know how to do it,” he said. “The ‘Leave It to Beaver’ type parents aren’t going to do that. But there just aren’t that many of them there compared to the whole population.”

Indeed, with college students receiving broadband access with their tuition, the days of riding a bike or car to the video store on Friday or Saturday night are old school. Leigh believes the lure of Netflix and illegal movie downloads, similar to what the original Napster did to retail music more than 10 years ago, contributed to the video stores’ demise.

A Blockbuster store employee named John said a disagreement with the landlord about reducing the $23,000 monthly rent prompted the closure. Reports suggest the building’s owner would prefer yet another eatery line on the popular street connecting downtown and the college campus.

“Yeah, we’ve been here since 1994,” he said. “It was a pretty good location.”

For John Merchant, who has owned and operated 49er Video for nearly 25 years, calling it quits had more to do with wanting to retire than the state of the video business.

“I’m old, and they’re broke,” he said about Blockbuster. “We could have stayed another five years.”

Merchant said the option of selling the entire business with 33,000 movies, including thousands of eclectic foreign titles, silent films, arthouse films, VHS titles never converted to DVD and collector boxed sets made the inventory a high-priced ticket. Instead, the store will sell off genres, including about 1,400 British films, screwball comedies, anime and complete TV boxed sets to interested parties. Throughout the years the store also sold product on Amazon.

“We’ve been known for that [content] for 20 years,” Merchant said, adding that at one time half of the town’s population was in his computer. “We’ve had customers here for 15-plus years.”

He said someone making a capital investment in physical rental these days without knowing to what end technology or consumer behavior is trending during the next five years is “probably crazy.”

Merchant said operating costs in Davis are high compared with what a video store offering the same product and pricing in Indiana deals with. He also said college students consistently ranked high among illegal downloading data cited (and subsequently reduced) throughout the years by the Motion Picture Association of America.

“But we always competed well through all of that,” he said. “What I’ve always believed is that it was much more than that. It was a competition over leisure time.”

Indeed, when 49er Video opened its doors, large portions of Davis and Sacramento didn’t have cable access, the Internet didn’t exist and primetime TV was predictable.

“Maybe the studio [sellthrough] strategy in a place like this is working,” Merchant said. “If you want to rent a title, you either have to go out of Davis to get it or go to Target and buy it.”

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