Midyear Snapshot Shows Top Rentailers Strengthening3 Oct, 2002 By: Melinda Saccone
The industry continues to consolidate, with the big guys getting bigger, according to a recent study conducted by Video Store Magazine market research. Meanwhile, rental prices are inching up, and DVD continues to gain ground.
Each year, Video Store Magazine produces an in-depth analysis of the industry's Top 100 rentailers. This year the magazine looked at the top players in the industry at midyear to see how they are doing.
A survey was conducted at the end of July of a weighted sample of 2001's Top 100 rentailers. The results were combined with other data Video Store Magazine market research collects for a comprehensive review of the biggest players in the industry.
20 Percent Opened New Stores
At the end of 2001, more than half (54.6 percent) of all U.S. consumer rental spending occurred in the more than 10,000 stores of these top rentailers. That figure will most likely move higher at the end of 2002, as midyear results point to top-tier rentailers expanding their store operations and their portion of the rental pot.
At midyear, 20 percent of the reporting Top 100 rentailers said they expanded the number of outlets they operate since December 2001. Those that expanded the number of stores in their rental chains grew the number of outlets they operate by an average of 15.5 percent. Those that have more than 1,000-store chains grew even more, averaging 15.9 percent.
Sixty-four percent of the reporting sample made no change in the number of stores in operation, while 16 percent reported store closings.
Those that reported closures decreased their operations by an average of 12.5 percent. Of all the rentailers with less than five stores reporting in the weighted sample, not a single one opened a store. Only 13.3 percent of that small-rentailer sample reported closing stores, compared to 15.9 percent of the entire midyear sample. This indicates small rentailers may be holding their own; however, rentailers in the Top 100 are the best of the best and may not be indicative of the larger small-rentailer base.
According to the midyear survey, 53 percent of the Top 100 rentailers reported rental revenue increases for the first seven months of 2002 over the comparable 2001 period, and 19 percent reported their rental revenue flat. Twenty-eight percent of the Top 100 rentailers reported their rental revenue on the decline at the end of July.
A midyear look at the two biggest rental chains -- Blockbuster and Hollywood -- shows they continue to gain market share in 2002.
At the end of June (the latest date for which figures are available), Video Store Magazine market research estimates Blockbuster's domestic disc and cassette rental revenue was down 1.2 percent. However, when game rental revenue is added to the mix, their total rental revenue does post slight gains (0.8 percent).
At the same juncture, Video Store Magazine market research national rental spending figures showed consumers had spent $4.5 billion at the half-year point, down 1 percent from the comparable period in 2001.
Blockbuster Grows Its Share
With a Blockbuster on nearly every corner (nearly 6,000 domestic retail outlets), it's no wonder that in 2001's Top 100 survey, Video Store Magazine market research estimated that one-third of all consumer rental spending was done in one of Big Blue's stores.
The midyear study indicates that its market share has increased even more in the first six months of 2002. Video Store Magazine market research estimates Big Blue's take of the rental market jumped 2 percentage points, from 33 percent of last year's rental take, to 35 percent of the $4.5 billion consumers spent renting discs and cassettes in the first six months of this year.
Hollywood Video, the nation's No. 2 rental chain, also gained in market share. In the first six months of 2002, Video Store Magazine market research estimates 13.1 percent of all rentals occurred in a Hollywood store, up from the 10.2 percent market share Video Store Magazine market research estimated the 1,800-store chain had at the end of 2001.
The midyear snapshot indicates DVD is quickly gaining ground. At the end of July, DVD rentals as a percentage of gross revenue averaged 30.4 percent in the sampled Top 100 stores, up from an average of 15.2 percent at the end of 2001. The midyear snapshot shows rentailers stock an average of 42.5 percent of their new-release rental inventory in the DVD format.
Game Rentals Flat for Most
Game rentals, another growing component in the rental market, remained relatively flat for most of the weighted sample of Top 100 rentailers. Last year, more than half of the Top 100 rentailers said they had plans to increase their game rentals in 2002. However, at the end of July of this year, game rentals as a percentage of gross revenue remained flat for most of the group, accounting for 6.4 percent of their gross intake -- on a par with last year.
Still, it's a different story at Blockbuster. Video Store Magazine market research estimates that Blockbuster, which has been aggressively pursuing game rentals, posted a 17.2 percent increase in its domestic game rental revenue for the first six months of the year. Video Store Magazine estimates domestic game rentals accounted for 10 percent of Big Blue's gross domestic revenue at the end of June.
According to the midyear review of Top 100 rentailers, the average price of renting a video is up in most Top 100 stores. Hollywood Video is the exception, as the chain has not changed its prices since 1999, with the exception of a few test markets.
At the end of July, the average price for renting a new VHS or DVD release in a Top 100 store was $3.58, up 3.8 percent from the $3.45 charged in the average store in 2001. Game releases posted the highest gains, jumping 34 percent, to $4.15, while catalog VHS and DVD releases averaged $2.21, a 12.7 percent increase from 2001.