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The Vanishing Video Store Rental

3 Apr, 2012 By: Erik Gruenwedel

Consumers renting a movie at the video store are projected to fall to 13% (from 20%) of the total home video rental market in 2012 as alternative channels such as kiosks and subscription video-on-demand flourish, according to a new report.

In other words, while the rental market is burgeoning compared to sellthrough, more people in Los Angeles will receive the Times newspaper delivered to their front door this year than will frequent a video store.

Indeed, with Dish Network slashing the number of Blockbuster video stores in operation to 1,000 nationwide from 1,500, the national video store footprint continues to shrink. In the southwest, Hastings Entertainment reported a 18% revenue drop for in-store disc rentals during its most recent fiscal period. 

Picking up the slack is Redbox-led kiosk vending, which will see its market share top 22% this year compared to 19% in 2011, according to Toronto-based The Convergence Consulting Group Ltd. At the same time, SVOD services such as Netflix, Hulu Plus and Amazon Prime will account for 25% of content rentals compared to 13% last year. By-mail subscription rentals will decline to 16% from 25% — spearheaded by Netflix’s ongoing emphasis on streaming, not physical discs.

Transactional VOD rentals are projected to increase 1% to 3%, while on demand ad-supported viewing remains unchanged at 21%. Nonetheless, the report suggested the audience for free, repurposed episodic TV fare is reaching a plateau with 19% of the weekly viewers watching upwards of two episodes on a network’s website or related location.

“Kiosk, mail and now streaming rental offer a lower-price value proposition and have radically altered the rental channel, while negatively impacting DVD/Blu-ray/[electronic sellthrough] and encroaching on TV subscription,” read the Convergence report titled "The Battle for the North American Couch Potato: Online & Traditional TV and Movie Distribution.” “We estimate downloaded movie and [episodic] TV sales represented 4% and 3%, respectfully, of 2011 DVD/Blu-ray/download movie/TV sales.”

Jan Saxton, senior analyst, filmed entertainment with IHS Screen Digest, said the data underscores the the ongoing impact the 2008 recession has had on consumers. She said the number of video stores in operation dropped to 6,000 in 2011 from 10,000 in 2010. In 1989, there were 70,000 video stores in operation in the United States, according to IHS.

“Consumers still love movies, but in these economic times they are looking for the best possible price and the most convenience,” Saxton said. “And so it’s either kiosks or Netflix.”

Meanwhile, the report projects 185,000 pay-TV subscriber additions this year, reflecting changing home entertainment habits as subscribers terminate or downsize pricier bundled cable/satellite TV services for lower cost online alternatives, including SVOD.

Convergence projects the number of cord cutters of multichannel video program distribution will top 3.5 million subscribers in 2012, up from 2.6 million in 2011.


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