Internet Kills the Video Store | Hacker News Reader

Internet Kills the Video Store

nytimes.com

25 pointsdanso44 comments

Internet didn't kill the video store, Blockbuster killed itself at the dawn of DVD. When DVD was coming out as a new format, Blockbuster got greedy and when the movie industry wanted the same profit sharing deal, Blockbuster was the #1 revenue source for Hollywood, so Blockbuster wanted a better deal.

Major movie studios decided to then make better wholesale deals with Wal-Mart driving the price of movies down from $20+ to $5-15. At the same time renting a movie from Blockbuster was in the $3-5 range and Blockbuster famously made a ton of money with late fees. Within a few years Wal-Mart was Hollywood's #1 revenue source.

Basically, Blockbuster had a near monopoly and used it to piss off both their suppliers and customers. Over time, Netflix, Redbox, and others have taken business from Blockbuster, but most of that was Blockbuster pissing it away more than it is the internet "disrupting" Blockbuster.

Blockbuster is a case of self-sabotage.

That just sounds a lot less plausible to me, like an explanation given if someone had asked for a devil's advocate position. I find it hard to believe that opting not to pursue a more lucrative deal for themselves with Hollywood studios in the DVD era would have significantly impacted Blockbuster's trajectory.

Wal-Mart would have likely negotiated very similar deals they ultimately got regardless of Blockbuster's actions (it's not as if Wal-Mart didn't sell movies up to that point anyway, or squeeze suppliers for great deals). Blockbuster's money-maker was always new releases (and fees on them), the price of which stayed around $20+ to buy on release anyway. Did they piss away their "near monopoly"? Most certainly, but I think it was by not adapting with the times rather than a commitment to late fees and driving Hollywood to Wal-Mart.

Blockbuster made sense in a non-automated DVD world, Wal-Mart or not. They didn't make sense in a digital (Netflix) or automated (Netflix, Redbox) world.

Just an armchair observer though. I could be wrong. But the "obvious" explanation in this case really does seem a lot more plausible.

Yes, except that before DVD's, tapes were routinely $20+ and DVD's dropped below $15 surprisingly fast and when you figure for inflation, that they are still around $15 means they are selling the same product for considerably cheaper than VHS did (and for a while in higher volumes).

I totally agree that digital hurt Blockbuster, but Blockbuster was in a terrible place before the world went digital streaming. Netflix DVD mailers basically stole millions of customers on the promise of "no late fees", which was clearly a huge customer complaint with Blockbuster.

Blockbuster's decline started before streaming was big and Blockbuster did a reasonable job to try and keep up with Netflix in terms of building up their own mailing business, digital rental business, kiosk business, etc. but the fundamental problem with Blockbuster's business is they needed to rent things for $5 a pop to pay for the revenue sharing and rent.

Redbox and Netflix built their business without paying as much or anything in revenue sharing and a completely different operational cost structure. The only way Blockbuster could have stayed afloat is to keep happy customers, but they pissed too many people off too many times by being too expensive and ripping people off with late fees. Happy repeat customers who are willing to pay a premium for awesome service will keep many businesses alive, but Blockbuster lost happy customers and didn't have awesome service.

Internet played a part, but let's not throw away the business fundamentals with the bathwater.

I'll miss Blockbuster. They were a staple of my childhood and I have many fond memories of them and the film nerds who used to work at their stores. I think they could have held on longer. I've never really liked Netflix mail service, given the few days of delay. And their streaming selection is still limited. Plus, I don't have cable/satellite TV, so it's sad to me that I think there's still an unserved segment of customers out there. But with current new DVD prices ($4 - $12) I don't see a compelling reason to rent them, and places like Target and Walmart will probably enjoy selling them for quite some time, like how BestBuy sold a good selection of reasonably priced CDs for years in the face of Napster and new online distribution, while competing CD stores all went out of business.

Have you tried Amazon? If you're prime there's a big selection of videos for free, but for those not free there's almost always a streaming rental available for an average of $2. I've found myself using the service quite a bit recently when I want to watch a specific video (as opposed to netflix when i just want to find something to turn on)

"Dish... said it still sees value in the brand name and will use it in limited ways."

I can only imagine that means licensing the logo for use in movies set in the 90's.

Is redbox a national thing? Interesting how the article blamed solely the internet and not redbox. Some parts of the city, I think there are more redbox machines than soda machines.

Yeah, I was wondering how this article could not mention Redbox. According to their website[1], they have 35,900 boxes nationwide. The rise of Redbox surely had to have impacted Blockbuster's business.

[1]: http://www.redbox.com/facts

It may not be obvious until you look closely at the pictures, but they're environmentally hardened enough to be placed outside (under an awning, no doubt more for the customer's convenience). Avoiding having to fight for precious indoor retail space likely makes a big difference, and the one I'm most familiar with is now quite a bit bigger than the one previously on the inside (albeit a replacement was forced by Mother Nature).

My father rents from it very occasionally, he finds it a lot more convenient than old video stores since it's at a place he goes every few days, and their business model works for him whereas I don't think Netflix's does.

They've started to crop up around all the gas stations and most of the chain stores around here. You can usually find one in any given Walmart, although they mainly seem to be targeting the gas stations currently.

I do wonder at what point the overhead of stocking the machines exceeds the income earned by having one conveniently located to pretty much anyone. Can they afford to keep them stocked with all the latest videos when they have one at every gas station and Walmart in a state?

On a related note we recently tried out the new redbox streaming app on the PS3. It was not a... smooth... experience. Errors galore, images failing to load, and actually getting the video you bought to play is pretty much a roll of the dice. I think their servers were woefully unprepared for the load they were subjected to.

If the design of the system is good, the overhead of stocking is going to be cheap. I mean, communications to the box says "put these discs in these locations", the guy opens the box pulls out that "tray" or whatever (many possibilities here) and replaces it with another that's also been computer and roboticly stocked, you're done.

Maintenance is a bigger unknown to me, but seeing as how they're in their 3rd? generation, they seem to have that under control. Capex could be the big one, those machines and their DVDs aren't cheap ... but they've been keeping this game going for quite a few years. A serious analysis of their financials would be required to make a guess of that, assuming their public owner breaks them out sufficiently.

Ah, and that company does the Coinstar coin cashing kiosks, so that might improve their servicing situation.

Redbox in McDonalds and Walmarts are probably the bigger reason for Blockbuster's demise. Its amazing how busy those kiosks are.

Its interesting that in some areas they locate at gas stations, some at big box stores, some at fast food, but locally they're in every food store.

You can fill your gas tank less than twice a month, avoid walmart like the plague, I haven't eaten at a McD in many years, but every couple days you have to buy fresh food at the supermarket... And there is always a short line at the redbox.

I'm a bit amazed they work.

In a Blockbuster, you can have a few dozen people looking around at once for the right movie to watch. On Friday and Saturday nights, they were often packed. But a kiosk, you have to wait for the other person to finish browsing and purchasing. Seems like they work precisely because the demand is just low enough that there is not too much contention for any one kiosk.

The folks at RedBox seem to understand that and have made it very quick to get what you want and leave. Plus, it takes very little time to go over the available movies.

Scarecrow Video in Seattle hasn't shown any sign of slowing down. Almost any movie ever made, rented to you by someone who's probably watched it.

It's the Powell's Books of movies. I'm impressed every time I walk in and every time I talk with someone who works there.

http://www.scarecrow.com

San Francisco has/had Le Video (9th Ave between Irving and Lincoln). I wonder how they are doing these days. I used to live down the street from them. Their collection was massive. You could even rent LaserDiscs.

The excellent Lost Weekend Video is still a going concern, on Valencia between 21st and 22nd (IIRC).

Scarecrow recently posted a letter saying they are in danger of closing:

https://www.scarecrow.com/40/9681/scarecrow-video-needs-your...

Sounds like the kind of thing that some giant arts endowment should be supporting, if paying customers can't keep up with costs.

I blame Blockbuster's management. It's funny as all the other video stores have died off, Family Video continues to add stores and is doing fine.

Ha, haven't seen one of those in awhile, but what you say is true:

http://www.sj-r.com/top-stories/x766862973/Family-Video-pres...

They have been growing at a rate of 3 per month, and have presences in both large and midsole regions. One of their successful strategies apparently is to sell pizza at their locations

Was anyone else expecting a (2007) after the article title? I mean, did this even need to be written?

I'm pretty sure it was written just so they had an excuse to use that title.

A lot of people on Hacker News forget that they're on the forefront of technology. DVDs remain widely used, even now. I doubt they'll last too much longer, but your experience as a adopter of new tech is not universal.

I've shocked some people in my social circle when I mention my macbook air has no DVD drive. They still use them. And my Dad goes to the local video store to watch movies on his TV. It will be a long while before he switches to an option that lets him watch Netflix on his TV screen, and he won't watch movies on a computer.

>A lot of people on Hacker News forget that they're on the forefront of technology.

Yeah, but all the Blockbusters around here went bust years ago. That's real life normal people evidence.

True, I suppose what's left is only about 30% of what they had when they went bankrupt.

I'm a self-described cinemaphile, so I tend to purchase Blu-rays and DVDs of movies rather than streaming them. I've yet to see a streaming service that offers commentary tracks, alternate audio tracks (e.g., original mono mixes), "Making Of" featurettes, etc.

Do you know of any?

Not the parent comment, but thought I'd answer any ways. Despite lots of looking around, I too haven't been able to find a streaming offering that comes close to competing with a well constructed Blu-Ray release.

My collection is built largely thanks to Barnes and Nobles' 50% off Criterion sales.

In addition to being a cinemaphile, i'm also an audiophile; so the lack of Dolby 5.1 audio content being streamed for the majority of movies on Netflix basically makes blue-ray/DVD my only option if I want to make use of my expensive receiver + surround speaker setup.

Old-fashioned video stores cater to markets that streaming services don't.

There's the low-income who don't have a device that can stream. There are those who don't have internet access for whatever reason. People who don't have a credit card to sign up for Netflix. The same kind of people who stand in line to pay their cable and phone bills in person. Then you have people who just don't embrace technology.

What about cinemaphiles who embrace special features that often aren't included with streaming services, such as commentary tracks and "Making Of" featurettes?

Eventually, that sort of thing will move to the digital versions too. It already is on some blockbuster titles. A month before Iron Man 3 hit store shelves on DVD/BR, it was available for download online, and only as the $20+ version with the bonus content.

Those features have been missing from rental discs for years. The studios know that customers like you are willing to pay a premium for bonus features, so they don't include them in cheap rental/streaming services.

To say nothing of people who want good recommendations on what movie to watch next. This is not something you ever got with Blockbuster, so good riddance, but the loss of neighborhood stores will lead to a constriction in the number of titles actually viewed (as opposed to available, which is a largely meaningless metric.)

This is something that should have happened around 2005.

> This is something that should have happened around 2005.

what is "something" ? people losing there job?

Every city benefits from a video store with a deep catalogue spanning all genres - including videos that are simply not available to rent/stream/purchase anywhere online because of licensing issues or copyright owner greed. I understand the Top 100 video stores closing. They are dinosaurs. But the long-tail of online content is not yet long enough to kill the video store completely. Yet.

Newsflash: Medicine kills disease. Seriously medicine killed a lot of professions associated with health. For example nobody needs leaches anymore, all those people that were growing, distributing, and selling them.

What happened is Blockbuster failed to take advantage of the economic opportunity internet presented and got left in the dust.

NCR sold off the blockbuster kiosk business (NCR had licensed the name for Blockbuster Express) to redbox a year or so ago. I remember the last time I went to a blockbuster (maybe 2008) and the employees were CLEARLY not happy to be working there.

Good riddance. I'm normally fairly sentimental when it comes to technology (still have the turntable of my long-gone teenage years) but I've always hated everything about going to video stores.

I look forward to the day when the same thing happens to Music Labels, and with any luck eventually Movie Studios.

Someone should make an updated song to "Video killed the radio star"

It almost seems like nobody got the reference. So, not only did Internet kill the video store, it also killed the radio-star-killing video song.

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