Things aren’t going well for video news rental goliath Blockbuster. Netflix’s rental service arguably offers a superior consumer experience. Redbox DVD kiosks are cheap, convenient, and fast. And online streaming from Netflix, Hulu, and other companies threatens to destroy a huge chunk of the DVD industry at a whole. In September we learned that they might be closing almost 1,000 of their remaining 4,400 stores.

Into the breach comes a new scheme to allow movie rentals through kiosks via SD cards. But does the plan make any business sense?
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There’s one thing that this summer has proven: People still love going to the movies. Movie grosses are actually up this year from last year, to $4.25 billion from $4.2 billion last year. And while studio executives are probably pleased with this development, one thing that hasn’t been as encouraging is the DVD market. While DVDs used to account for a huge percentage of a film’s revenue, that percentage already plateaued and is being supplanted by a number of other competing forces. The format itself is under attack, as Video-on-Demand and DVRs continue to take hold in American households.

One of the signs of the times has been the struggle of brick-and-mortar stores to stay competitive. With Netflix and Redbox offering consumers a cheap and easy way to get movies, it’s difficult for companies who are paying massive overhead renting physical space to continue to operate profitably. Last week we reported on how Blockbuster might be closing 960 of its stores, which comprise 20% of its 4,400 outlets. Anecdotally, I’ve seen three separate Hollywood Videos close in my area, which was actually kind of sad, as I used to enjoy browsing through the endless aisles of DVDs/Blu-Rays and chatting with the occasionally knowledgeable staff member. While video rental stores may never entirely go away, we are certainly witnessing an industry in the midst of a sea change, and in 5-10 years, the video rental store landscape will probably look completely different than it does today. Would you be sad if video rental stores vanished?

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Video stores of every kind have faced serious difficulty over the past few years as Netflix has become the de facto movie rental outlet. The Blockbuster chain has been closing stores at a steady clip, and is likely to continue doing so for the next few years.  But a new regulatory filing released this week suggests the end of the chain’s existence as a big brick and mortar outlet could come sooner, rather than later. Read More »