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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Many video stores struggle for survival

David Morrill Contra Costa (Calif.) Times

Once found on every Main Street and strip mall, traditional brick-and-mortar video stores are harder than ever to find. Their scarcity is expected to grow.

Less than one year ago, the top two players in this industry were Blockbuster and Hollywood Video. In February, Hollywood Video shut down, and Blockbuster is expected to file Chapter 11 bankruptcy as early as this month.

While the mighty have fallen, the mom-and-pop video stores are doing everything they can to survive. When Rick and Scott Lafranchi opened their first of eight Silver Screen Video Centers 24 years ago in the San Francisco Bay Area, Blockbuster was seen as a dark cloud threatening their business. Now, they hope to avert the same fate expected for the national video rental chain.

“We’ve always heard that we’re not going to make it much longer, but here we still are,” Rick Lafranchi said. “It’s been a great run so far, and hopefully it will keep going.”

But if the past 24 years were thunderstorms, the next years may be a hurricane in comparison, analysts predict.

No matter how much people enjoy walking the aisles of video stores to seek out obscure titles, rough economic times coupled with new ways to deliver movies will likely lead to a slow bleed that is expected to follow the same path as the typewriter-repair shop.

In 2003, there were 25,042 establishments that focused primarily on DVD, video game and VHS rentals, and industry revenues were $11.9 billion, according to IBIS World, a Los Angeles-based research firm. In 2010, revenues dropped to 17,369 stores with revenues of $7.8 billion. And five years from now, numbers are expected to drop even further.

“The two primary issues are convenience and price,” said George VanHorn, senior analyst at IBIS World. “People are finding alternatives in other distribution channels so they don’t have to go to the same types of retail stores they had to 10 years ago. As a result, we’ve seen the numbers drop eight years in a row.”

When the Lafranchis first entered the market, Blockbuster was emerging as the industry heavyweight. Today the company is struggling, to say the least. Blockbuster has lost $1.1 billion since the start of 2008. It is trying to escape leases on 500 or more of its 3,425 stores in the U.S., and in the past year, more than 1,000 Blockbuster stores have been closed.

In a nod to the success of video-rental kiosks offered by the company Redbox, Blockbuster has deployed about 6,000-branded vending machines that rent DVDs for $1 per night. Many Safeway grocery stores now have Blockbuster kiosks in them.

John Dwyer rented the movie “Date Night” from a Redbox kiosk in Danville, Calif., recently. He says that he misses going to video stores and perusing the selections, but being able to grab one for a dollar while picking up eggs and cereal is a worthy trade-off.

“The video stores take the two things I don’t have a lot of right now: time and money,” he said. “It’s unfortunate, but that’s the way it is.”

For the owners of Silver Screen Video Center, the key to their survival is that they’ve “sharpened their pencils” and made adjustments to keep operations afloat.

The Lafranchis are confident that there’s still a market for obscure titles. They try to have a good balance of new releases and hard-to-find titles. Often they’ll have special sections devoted to specific actors, such as Dennis Hopper, who recently died.

“They might come across something they otherwise might not have thought about,” Scott Lafranchi said.

Hollywood film studios have tried to give video stores a break in their competition with online streaming and kiosks. For example, certain titles will be made available in stores 28 days before they’re available in kiosks or through Netflix.

Los Gatos, Calif.-based Netflix officials says that concession has made little impact on their rising success because the majority of their subscribers opt for older titles. With 11 straight years of earning growth, Netflix currently has more than 15 million subscribers.

Steve Swasey, vice president of corporate communications for Netflix, said DVDs as we know them might be phased out in 20 years. Thousands of titles are available via streaming, which can be watched on video-game consoles such as Xbox 360, PS3, and Wii.

“We have more selections to our customers than anyone can watch in a lifetime,” Swasey said. “We literally have something for everyone.”