Magazine article Marketing

Helen Dickinson on Retail: Downloads Spell End of Movie Rental

Magazine article Marketing

Helen Dickinson on Retail: Downloads Spell End of Movie Rental

Article excerpt

Although I'm not a typical customer of the video rental stores, because we have a large library of films on DVD and video at home, it's difficult not to see how dramatically the industry is changing.

The number of high-street rental shops is plummeting as consumers are finding more comprehensive and attractively priced rental - and retail - services online.

To look at the high street, where shops are closing, you might think the rentals market is diminishing, but that would be a mistake: it is actually growing as more people shift their rental needs to the online specialists.

From no share at all just a few years ago, online rentals now account for 25% of the UK market, according to Lovefilm, one of its leading players. Evidence of how the explosion of online film distribution has hit the high street can be seen from the failure of retailer Silverscreen, which went into administration in March, and the fact that rentals stalwart Blockbuster has added a successful online offering.

Although the high-street stores undoubtedly have convenience on their side and cater very successfully for spur-of-the-moment rental decisions, one of their main challenges is that these customers tend to demand only the latest blockbuster films. Amazingly, as many as 50% of rental store revenues can be derived from as few as 25 films in the course of a typical year. This leaves the rentals companies with the issue of having to deal with vast numbers of the same DVD once demand for a blockbuster wanes.

Because the online players are catering for a more premeditated rental - and have massive storage space compared with a high-street shop - they are able to satisfy consumers' growing appetite for back-catalogue films and speciality titles much more easily.

While big players in the UK rentals market such as Amazon and Blockbuster are seeing their online market shares increase, the pure online rentals model is proving the most cost-effective. The risk of cannibalisation is minimised - of physical stores in the case of Blockbuster, and online sales in the case of Amazon.

That it is not so straightforward offering both a retail proposition and a rental service from the same online store can probably be seen from Sainsbury's recent decision to end its DVD rental service and concentrate solely on selling films.

The Sainsbury's rentals offering was provided as a white-label service by Video Island, which merged with Lovefilm earlier in the year, in a move that created one of the leading online rentals companies in the UK. …

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