Info about Video Rentals
Blockbuster Online and video rentals
Video rental stores are still popping up all over the world, but no longer are these stores ‘bricks and mortar’ retail outlets. Instead, they are mostly based online. There used to be a proliferation of video rental stores, but they all succumbed to the pressures of changing technologies in the digital age, and folded under pressure from more competitive retailers. Today, the majority of video rental stores have moved their inventory online to sell to customers across the world instead of being limited to their local store bases. Some chains, the most successful being Blockbuster, continue to maintain a physical presence.
Blockbuster has long been the most prosperous of video rental chains, and has 9000 stores in twenty five different countries across the world. Where other stores have failed, Blockbuster has thrived due to a clever business model and inventive marketing practices. In the early days of video rental, stores would purchase a video for a large flat rate, usually around $65. They would then have the rights to rent out this video for the life of the cassette. This meant that a video would need to be in high demand for the store to recoup its outlay on a particular video and begin to make a profit. Blockbuster found a way to be more profitable by negotiating a deal with its suppliers. Instead of paying a large fee for the videos, they acquired them for a low cost, and paid the studio 40 percent of rental costs, keeping the remaining 60 percent. As well as lower costs, this arrangement also allowed Blockbuster to rent movies which were unavailable at other video rental stores, shortly after their release.
Going into the digital age with the development of DVDs, and eventually Blu-Ray discs, Blockbuster has continued to adapt its strategy in order to survive and prosper. In 2010, Blockbuster plans to close up to 960 of its US based stores, in order to open 10,000 video rental kiosks. The chain has done this, as well as creating an online branch- Blockbuster Online, in order to fend off the ever growing number of competitors who base their operations online. The Kiosks are far cheaper to run than stores, and due to their compact nature, digital disks are a lot easier to store in great quantities than traditional VHS cassettes.
Blockbuster Online was opened in 2004 in order to compete with other online DVD rental services, such as Netflix. Blockbuster began with 10 warehouses in which to store the DVDs, however a large growth in the popularity of the service has caused this number to increase to 41. The customer orders their desired rental via the Blockbuster website, and has the DVD or Blu-Ray delivered to their home. After watching the film, the customer then sends back the film in a pre-paid envelope. Once this has been processed, the customer is free to rent more films.
In the UK, the leading online video rental provider is LoveFilm. By 2009, this service claimed to have over 1 million members, as well as providing 4 million rentals a month across the five countries in which it operates. This level of success truly demonstrates the potential that an online rental service has, especially when video games are also included.
Not everyone wants to view films more than once, so a quick and efficient rental service benefits them perfectly, and they will be glad to pay for the privilege. Companies are now starting to recognize the profit opportunities in this market and a wide variety of different competitors are springing up. This promises more choice and better value for the consumer.