The Death of The Video Geek

I spent June of this year in Ghent, a small town near Hudson, New York. Hoping to rent some John Sayles movies one night, I headed into town, pulling up alongside a group of heavily pierced teenagers—your average counterculture youth. I asked them where to go to rent a video, and they suggested the Hollywood Video on Route 9. I asked if there wasn’t an independent video store nearby, because Hudson has an arts scene and a wealth of antique stores and seemed like a good candidate for one. They directed me to a strip mall across from the Hollywood Video.

The store was filled with stale cigar smoke and video games, a multitude of lottery machines and a few yellowing posters from mid-90’s kung-fu movies. Nearby VHS tapes lay in messy piles on sagging metal racks. I asked for John Sayles movies, to which the proprietor predictably answered, “Who?” When I explained, he directed me to investigate the VHS piles myself. “I’m not even renting those anymore,” he said, with the shiny new DVD boxes stacked behind him. “I don’t even know what’s there.”

I found one copy of Passion Fish (1992), and then asked for
another video store. “Hollywood Video,” he said. “Across the street.”

Eventually, after much investigation, I found a place called Video Visions about twenty miles away in the tiny village of Chatham. Though the teenagers behind the counter blinked when I asked for Sayles, out from behind them stepped the owner, Steve Campbell. Not only did he have every Sayles movie in stock, he knew all about the man and his movies. Bingo. And it only took half a day driving around this relatively cosmopolitan area just two hours from the independent film capital of the world. If it’s this hard to find a decent independent video store and a knowledgeable video store clerk here, how have the rest of them survived?

According to Sean Bersell, vice president of public affairs for the Video Software Dealers Association, a not-for-profit international trade organization, there are around 24,300 video stores in America, almost half of which are independently owned, as well as 8,000 retail centers like supermarkets and drug stores that also rent videos. The big three chains—Blockbuster, Hollywood Video, and Movie Gallery—slurp up more than sixty percent of the revenue, leaving the remaining stores to fight for the rest. But Bersell is optimistic. Video rentals garnered $8.4 billion in 2001, and the industry has adapted many times to a continuing morass of challenges.

The home video industry was born in 1975, when Sony marketed the first Betamax machine with a TV set, retailing for $2,300. By 1977, RCA had introduced the $1,000 Video Home System: VHS, as we know it today. Later that year, Video Club of America took out an ad in TV Guide, offering fifty titles for sale at for $49.95 each, including Hello, Dolly (1969) and MASH (1970). Finally, in December, 1977, George Atkinson purchased one copy of each of those films and opened Video Station in Los Angeles, the first video rental store.

From there, it’s been a rocky ride. In the 1980s, video stores exploded across the country, becoming one of the most profitable small businesses in America. Most stores would purchase a single video copy of a movie for $50 to $100, making it difficult for customers to find what they were looking for. Bersell remembers standing by the returns counter, waiting for a video to come back. “Some videos never made it back to the shelves,” he recalled. During this early period, renters often went home with a video other than the one they wanted. It was a business model Bersell calls “managed disappointment.”

“The strategy was basically, ‘You didn’t get what you came in for, but you’re gonna like this.’”

In order for video stores to survive under the managed disappointment model, video store clerks needed film expertise, to make suggestions and offer alternatives. They had, in short, to be Randal.

Randal is the anti-hero of the 1994 Kevin Smith movie Clerks. Overly educated about film and with antagonism for his less-informed customers, Randal works at a small video store but, ironically, patronizes the big chain, Video America, for his own rentals. When a customer asks him for a G-rated kids’ movie, Happy Scrappy Hero Pup, he continues placing an order for videos over the phone, including Put It Where It Doesn’t Belong and My Pipes Need Cleaning.

At my own local video store in Park Slope, Brooklyn, that specializes in art house and foreign film, Randals rule, though they refrain from deliberately offending customers. Ask for a Disney movie, and they may snarl a bit. But inquire after the inspiration for the Star Wars character C-3PO, and they’ll happily chat about Akira Kurosawa’s The Hidden Fortress (1958).

Steve Anderson, who writes an online column, “Reel Advice From the Video Store Guy,” calls Randal the hero of video store guys everywhere. “He opens late, closes early, leaves when he likes and stays when he chooses,” says Anderson via email. “And he gets paid for all of it.” But Anderson admits that jobs for modern-day Randals are “as secure as a temp at Enron.”

In the mid-1990s, the rise of the video store chain endangered the Randals of the world. Major movie studios—that now make sixty percent of their revenue from video rentals—began to offer revenue sharing, under which stores could rent large quantities of videos directly from the studios for as little as $10 each, filling their shelves with multiple copies of videos. Inspired by the Domino’s Pizza model (delivery in thirty minutes or it’s free), chain stores advertised their new promise: the title you want in stock or you don’t have to pay. Revenue sharing was a boon for the chains, which had the cash and the room for such stocking, and it increased their profits dramatically…but at the expense of the independent store.

“It was like SARS,” says Bersell. “It just went through and wiped out a lot of these small, independent video stores.”

Shopping for a video at Blockbuster can be as frustrating as trying to find informed help at Home Depot: too many copies of the same movie, not enough variety, no one to advise you. And yet the chain video stores continue to thrive, buoyed by revenue sharing. In 1999, 49er Video in Davis, California levied a suit against Dallas-based Blockbuster, along with the home video divisions of Columbia TriStar, Disney, Paramount, Twentieth Century Fox, Universal, MGM and Warner Bros., for what they felt was the illegal practice of revenue sharing. In 2002, MGM and Warner settled out of court for $17 million, but a month later, a Texas judge threw out the rest of the case before it ever reached the trial phase, citing lack of evidence that the studios and Blockbuster had done anything illegal.

“It was not by any means a complete washout,” says 49er owner John Merchant. “While it was not a complete success, it did help to stabilize the pricing in the marketplace. Now they’re forced to look over their shoulder.”

Bersell admits that revenue sharing impedes the small businessperson’s success, but he concedes, “That’s the nature of the free market. It’s sad, but that’s competition.”

In the late 1990s, when the Randals were beginning to lose hope, the nature of competition changed once more.

By 1997, the Digital Video Disc—now Digital Versatile Disc—was unleashed, at what’s called a “sell-through” price: individuals, independent stores and giant chains like Wal-Mart all pay the same amount to buy a DVD, on average around $15. This allowed the independent stores to bounce back, increasing their number of titles and supply, and to offer what has proved to be one of the biggest sellers for the independent video store: previously viewed DVDs. According to the Video Software Dealers Association’s annual report, previously viewed DVDs have generated over a billion dollars in sales since they’ve been on the market. The average household with a DVD player purchased more than 15 DVDs in 2003. At the height of VHS, says Bersell, the average household bought only 5 or 6 VHS tapes. And last year, DVDs accounted for fifty-three percent of video rentals. DVD sales cited in the 2003 report at $8.7 billion, were more than rental revenue for DVD and VHS combined.

Despite the invigoration from DVD sales and rentals for the indie store, the challenges continue. Total video rentals are down fifteen percent from the same period last year. Online and mail order rental companies like Netflix, which generated more than $270 million last year, pose a new threat, as do the expanding cable services such as movies-on-demand (12.5 million homes were able to access movies-on-demand in 2003), new DVD kiosks and digital recorders like TiVo.

The ongoing problem of piracy also daunts video stores. Illegal DVDs sold on the street or downloaded from the internet leak dollars away from not only the indie video store but the movie studio. The VSDA reports that studios lost as much as $3.5 billion to piracy in 2003, and that 400,000 to 600,000 movies were illegally downloaded.

And, as always, chains dominate, intimidate and discourage independents. Last year, for the first time, Wal-Mart—the king of all chains—made more money renting videos than Blockbuster. It’s a question that baffles many of us as we try to resist the lure of the Targets and Wal-Marts and Sam’s Clubs of America: How can the little guys fight the big ones? The old aphorism “You can’t fight City Hall” becomes “You can’t fight corporate headquarters” in the sell-through market.

Now even Blockbuster and Wal-Mart face competition. In May of this year, McDonald’s joined the newest technological shunt: the AEM, or Automated Entertainment Machines. The Redbox kiosk dispenses DVDs for $1 per night, and can be returned at any McDonald’s with an AEM. With more than 30,000 McDonald’s restaurants in the world and only about 8,900 Blockbusters, even the chains may feel the squeeze of the DVD Automat.

With all this going on, what’s a Randal to do?

“The one thing independent video stores need to learn how to do is adapt,” says Ray Hanania, author of Video Store Strategies. “They have to be constantly looking to see which way the trends are going, and don’t be too quick to marry something.”

And video store owners must be creative. They have a few legs up on the chains and the impersonal new technologies. First, they offer one product the big chains and Netflix don’t: adult video, or what Bersell refers to as the “thing that we don’t talk about.” For many video stores, this is their bread and butter, albeit tucked away in the back of the store.

For Merchant of 49er Video, it’s a simple case of offering a little color. “We’re not vanilla,” he says, citing their database of foreign films, martial arts pictures and documentaries. “We don’t rely solely on the new release business.” He adds, “Nobody can out-Blockbuster Blockbuster. We try to provide an alternative.”

Other stores specialize. Eddie Brandt’s Saturday Matinee in Los Angeles serves as a research center for studio executives and directors who can comb through posters and stills as well as remakes and originals of Hollywood classics, including 2,000 silent films. Rocket Video, also in LA, specializes in foreign-language films. The Philadelphia-based chain TLA offers a comprehensive selection of gay and lesbian films. There are sci-fi video stores, horror and cult stores, art house and independent specialties, but these only survive in areas with a highly film-educated, concentrated population.

In less cinema-centric areas, video stores have embraced that age-old business model: diversification. There are combination video stores and ice cream parlors, magazine stands or electronics shops. We have Two Boots pizzeria and video in New York or the Rogers Plus Canadian chain, which sells digital TV, cell phones and high-speed internet access along with DVDs. But the most profitable combination seems to be the video store and tanning salon.

According to Ted Engen, president of Video Buyers Group, there are over 3500 video stores/tanning salons in the United States. “At first [the combination] looked like oil and water,” he says. “But after crunching some numbers we started staying, this is actually a pretty good thing.” Weekends are peak times for video stores; for tanning salons, business picks up Monday through Thursday. Summer marks the busiest video season, while winter is best for tanning. And independent video stores already have a strong commercial base, so they’ve surmounted the greatest obstacle: getting folks to walk through the door. Once inside, customers might be offered video-tanning cross promotions, like half off Annette Funicello’s beach party movies with every ten-minute tan, for instance.

Four years ago, Nicely’s Video in Buxton, Maine became Nicely’s Video and Tanning. “I wouldn’t have a video store if it wasn’t for tanning,” says Keith Nicely, whose business was faltering in the late 1990s until his wife, Pam, suggested adding the tanning element. “We put in one unit, and it basically turned a 10×10 area into $32,000 the first year.” Nicely now reaps half his profits from tanning alone. “In four years, my overhead’s gone up zippo, nothing, and I’ve built a $100,000 business.”

But even tanning beds can’t save some independent stores. Three years ago, one of the first video/tanning combination stores, Premiere Video and Tans in Walnut Ridge, Arkansas, was gobbled up by the Movie Gallery chain, which continues to maintain the tanning beds. The bottom line, says Engen, is that “the video business is tough right now.”

Still, independent video stores have one final edge over chains, new technologies and piracy: customer service. Yes, the Randals can save the day. “The clerks who know everything about every movie, who know their customers, are the ones who can make a difference,” says Bersell.

“There are more than a few of us who try to bring some enlightenment to people,” video story guy Steve Anderson says. “We know how hard it can be to pick a good movie when the shelves are filled with an indelicate mix of direct-to-video flotsam and big-studio wastes of celluloid, with the few gems buried in among them. We watch all the videos we can stomach, and we spread the word.”

It’s up to us to keep the word out there, to patronize our local video stores and seek advice from our own Randals. Most patrons are fiercely loyal to their chosen video stores (lovers of Black Dog Video in Vancouver, for instance, maintain a blog entitled, “On Hating Blockbuster”), but there will doubtless be snags galore for future Randals.

“The consumer decides with their wallet where they’re going to shop,” says Bersell. So the question remains: Would you rather be glared at by a film snob or blinked at by a clueless corporate video dispenser? No one works at a video store for the money, so we must patronize the store where they do it for love.

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