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Report: Rental Store Market Share to Decline 20% by 2013

13 Mar, 2009 By: Erik Gruenwedel

DVD-by-mail subscription services and standalone kiosks, according to a new report, are steadily supplanting a trip to the DVD rental store.

In its 2009 video rental market report, Adams Media Research said brick-and-mortar DVD rental stores would generate about $4 billion in revenue by 2013, down about 27% from $5.5 billion in 2008.

Considered a cost-effective alternative to sellthrough in the current economy, the overall rental market is projected to remain essentially unchanged at around $8 billion in annual revenues.

“It is clear that the video rental industry is a strong beneficiary of the current economic crisis,” Stacey Widlitz, analyst with Pali Capital, said in a recent note.

Traditional rentailers such as Blockbuster, Movie Gallery, Hollywood Video and Family Video, among others, would represent 48% of the market, compared to 68% last year, according to Adams. Lone bright spot: In-store subscriptions, which are expected to grow 51% to $271 million.

Kiosk services such as Redbox, The New Release and DVD Play, in addition to expected units from Blockbuster, would exponentially expand segment revenue to $1.2 billion from about $400 million.

Widlitz said that with rental titles available for $1 at kiosks, consumers in today’s economy are less likely to purchase a DVD for $15 to $20.

“The lower price and increasing convenience of rental are driving growth,” she said.

Online DVD rental pioneer Netflix would spearhead DVD-by-mail growth 41% to $2.9 billion by 2013, spurred in large part to its value-added streaming service.

“Streaming is in a long line of innovations — from the superstore replacing the mom & pops to revenue-sharing copy depth problems, subscription and kiosk — that are all new ways to do the business,” Adams said. “It all keeps consumers happy and coming back.”


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