Almost like the Jetsons
About
five years ago, I don't remember what exactly made me suddenly realize
that I never saw a single customer above the age of 30 at our local
video store. The university student population happily patronized the
store, especially since their bulk candy aisle was so excellent, but I
don't think I ever saw an actual adult at the store. (There might be a
slight cultural difference here.) I remember how this realization made
me realize about how fragile the whole video rental business must be.
And these days it looks like the chickens have come home to roost.
Ever since we first got the digital terminal and then the Personal Video Recorder, it was obvious that video stores are going to die. When you think about the whole hassle of first physically picking up a video and then, even more annoyingly, going back to return it, this ordeal just can't compete with clicking a few buttons on the remote control to watch the movie on a video-on-demand or pay-per-view channel for the same price. A movie is just a very long string of bits, and moving bits around physically is so totally 80's. As they say, you shouldn't underestimate the bandwidth of a 747 fully loaded with CD-ROM:s, but there is also that little thing about customer convenience to consider.
But not everybody has the cable, you might say. Well, just wait a few years. And even if there are people who still have to rent their videos physically (assuming they are even interested in watching movies), various video-by-mail companies will take over that business. After all, if your task is to efficiently distribute small, thin and light disks of metal to the homes of your customers, what would be the best way to do this especially when the delivery doesn't meet a strict deadline? Duh. Piggyback on the existing postal service and you are all set.
One warehouse full of DVD:s and a bunch of guys with a few computers can service an area that would take Blockbuster a hundred physical locations to saturate. How could Blockbuster or any other major rental chain possibly compete with that? Considering the nature of the video rental business, in which the chain purchases a title and tries to get back the money with repeated rentals, it doesn't seem to me that the profit margins would be that high. And the competitors don't have to take away all their business, just enough to remove this profit margin, and that's that about that.
But there are not going to be much profits to reap in the DVD-by-mail business: if there were any, the competition would become fierce as soon as the targeted mailing and direct mailing companies got into the business. And with them, a thousand little entrepreneurs stuffing DVD:s into envelopes in their garages. Wasn't it just a few months ago when Wired reported about two guys who had started a massive porn-by-mail business on their own?
(By the way, I don't know how this thing works, but from the algorithmic viewpoint it's probably sensible to stuff the envelopes by repeatedly taking the closest DVD from the pile and asking the computer to find the next customer to send it to, instead of repeatedly asking the computer for the next customer and the DVD he wants, and then for each customer, digging through the pile to find that particular DVD.)
I would actually predict that in ten years, perhaps even in five, physical video rental stores will completely cease to exist. I would probably even bet actual money on this prediction.
Ever since we first got the digital terminal and then the Personal Video Recorder, it was obvious that video stores are going to die. When you think about the whole hassle of first physically picking up a video and then, even more annoyingly, going back to return it, this ordeal just can't compete with clicking a few buttons on the remote control to watch the movie on a video-on-demand or pay-per-view channel for the same price. A movie is just a very long string of bits, and moving bits around physically is so totally 80's. As they say, you shouldn't underestimate the bandwidth of a 747 fully loaded with CD-ROM:s, but there is also that little thing about customer convenience to consider.
But not everybody has the cable, you might say. Well, just wait a few years. And even if there are people who still have to rent their videos physically (assuming they are even interested in watching movies), various video-by-mail companies will take over that business. After all, if your task is to efficiently distribute small, thin and light disks of metal to the homes of your customers, what would be the best way to do this especially when the delivery doesn't meet a strict deadline? Duh. Piggyback on the existing postal service and you are all set.
One warehouse full of DVD:s and a bunch of guys with a few computers can service an area that would take Blockbuster a hundred physical locations to saturate. How could Blockbuster or any other major rental chain possibly compete with that? Considering the nature of the video rental business, in which the chain purchases a title and tries to get back the money with repeated rentals, it doesn't seem to me that the profit margins would be that high. And the competitors don't have to take away all their business, just enough to remove this profit margin, and that's that about that.
But there are not going to be much profits to reap in the DVD-by-mail business: if there were any, the competition would become fierce as soon as the targeted mailing and direct mailing companies got into the business. And with them, a thousand little entrepreneurs stuffing DVD:s into envelopes in their garages. Wasn't it just a few months ago when Wired reported about two guys who had started a massive porn-by-mail business on their own?
(By the way, I don't know how this thing works, but from the algorithmic viewpoint it's probably sensible to stuff the envelopes by repeatedly taking the closest DVD from the pile and asking the computer to find the next customer to send it to, instead of repeatedly asking the computer for the next customer and the DVD he wants, and then for each customer, digging through the pile to find that particular DVD.)
I would actually predict that in ten years, perhaps even in five, physical video rental stores will completely cease to exist. I would probably even bet actual money on this prediction.
You're probably wrong about DVD-by-mail, for a simple reason: immediate gratification.
Posted by Dog of Justice | 12:25 AM
For the last several years we've been patronizing an independent video store that has an amazing collection of foreign and/or obscure DVD's and videos. While it's never what I would call crowded, at least it doesn't seem to do any less business than it did in the past (admittedly, this is based on my occasional observations). We have DirecTV, and while there are many pay-per-view movie channels the selection at any given time is a microscopic percentage of what's available at the video store. If there's a lesson in this, it's that a video store which makes an effort to stock more than just the latest hits may be able to find a niche market and survive, maybe even prosper.
As for DVD-by-mail, not only does it fail to offer immediate gratification, as dog of justice noted, but I have heard that Netflix, by far the dominant such company in the United States, is noted for less-than-optimal customer service, to put things politely.
Peter
http://journals.aol.com/r32r38/Ironrailsironweights/
Posted by Anonymous | 10:19 AM
We have DirecTV, and while there are many pay-per-view movie channels the selection at any given time is a microscopic percentage of what's available at the video store.
The Long Tail exists, that's true. But since the cost of disk space and bandwidth will keep plummeting, you'll notice that in five years or so, your cable company will be able to offer you essentially every single movie ever made, with the possible exception of some real-small niche movies.
If there's a lesson in this, it's that a video store which makes an effort to stock more than just the latest hits may be able to find a niche market and survive, maybe even prosper.
I predict that even the niche video stores will lose to the power of Internet, when the small movie companies (or whoever has bought the rights to their film archives) start selling their movies in a "download for $2 and burn your own DVD" style. That is, the same way that Apple iTunes sells music these days.
I have heard that Netflix, by far the dominant such company in the United States, is noted for less-than-optimal customer service, to put things politely.
Those issues will be corrected by the merciless hand of competition as soon as the other companies move in.
Posted by Ilkka | 10:44 AM
At least for me, one enjoyable aspect about a video store is the possibility to browse the available DVD selection. I'd rather flip through DVD covers than browse some www-style pages etc. Going to a video shop is nice especially if I am together with friends or a date.
I would say that video stores won't disappear at least from densely populated neighborhoods where enough customers live within a couple of minutes of walk to the store.
Posted by Anonymous | 5:09 PM