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Video Store Count Fell by a Third From '92 to '02

21 Jan, 2005 By: Holly J. Wagner

It's no secret that the video industry is shrinking and consolidating. But by how much and how fast?

The U.S. Census Bureau does a full census of households and businesses every five years, most recently in 2002.

Although not all information for 2002 is available yet, the information that is available for the entire video rental industry (defined as “establishments primarily engaged in renting prerecorded video tapes and discs for home electronic equipment”) clearly shows the migration of store control and revenue generation to the largest players — as well as an overall decline in the number of stores in the country.

In 1992, the four largest video rental companies controlled 1,659 of the total 33,733 video stores in the country. By 2002, the four largest chains controlled 8,594 of the total 23,527 stores in the country, according to data from the Census Bureau.

Revenue has clearly concentrated with the four largest chains, which accounted for 22.9 percent of employer video store revenue in 1992, 46.8 percent in 1997 and 67 percent by 2002.

In all, the industry shrank from 33,733 video stores in 1992 to 30,539 stores in 1997 and down to 23,527 stores in 2002. That includes companies with and without employees.

Nonemployers — the smallest of the mom-and-pop shops, which have no payroll — took the brunt of the consolidation hit between 1992 and 1997. Their ranks shrank from 11,735 stores in 1992 to 7,503 in 1997 and to just 4,838 in 2002.

Still, small businesses dominated the overall U.S. video rental landscape by store count for 1992 and 1997 and may account for as much as half of the nation's store count when complete 2002 figures become available later this year. Stores are individually counted even if they are part of a chain or a larger company.

In 1992, nonemployers and single-store employers combined numbered to 27,269 of the 33,733 total stores. By 1997, the number of single-store and nonemployer businesses dipped to 20,201, a disproportionate decrease on the total field of 30,539 stores that year. The breakout for 2002 is not yet available.

“The data you cite simply confirms what we all know: The 1990s saw intense consolidation in the home video retailing sector, with the largest chains increasing their market share and their store count, while the single-store sector was contracting,” said Sean Bersell, VP of public affairs for the Video Software Dealers Association (VSDA). “And if the Census data are to be accepted, they show that the surviving stores (the stores that now make up our industry) generate two and one-half times as much revenue per store as they did in 1992. Even adjusted for inflation, this amounts to a more than 50 percent increase in real dollar revenue per store.”

The VSDA paired with the National Association of Video Distributors (NAVD) in a call-out Storefront Survey in 2000 and found 27,882 storefronts that rented movies. Of those, 19,837 derived 50 percent or more of their revenue from movie rental, said Carrie Dieterich, VP of marketing and industry relations at VSDA.

“In 2002, we ran a Dunn & Bradstreet report that identified video stores at 24,300,” she said.

Census figures put video rental specialist revenue at $5.5 billion in 1992, $7.5 billion in 1997 and $9.6 billion in 2002.

“This jibes pretty well with our numbers,” said Tom Adams, of Adams Media Research. “Although $5 billion in 1992 is a little low even for just specialist rentals. That suggests that specialists only had 60 percent of the market, which we believe was 80 percent after 1985 when the convenience stores got out and is 90 percent now.”

“The revenue of the average video store goes from $163,000 in 1992 to $376,000 in 2002, reflecting the end of the transition from '80s-style mom-and-pop video stores to '90s-era chain superstores,” he added. “If traditional rentals continue to decline, as they have in each of the last three years, we'll likely see ongoing consolidation.”

While the bureau breaks out some information by firm size, it does not disclose data for individual firms to protect their business secrets. And because it takes time to assemble industry-specific reports, some data, for example, breakouts of chain size by number of stores controlled, are not yet available for 2002. (Figures in the store control chart for 2002 are Home Media Research estimates based on Census Bureau data).

A spokesman for the bureau was not immediately able to determine how the bureau counts and reports distribution centers for online rental businesses, a relatively new wrinkle.

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