Video Rental Stores on Deathwatch: Blame Netflix and Internet

Can Falls Church branch avoid this fate?

Businesses offering cheap entertainment traditionally perform well in a recession.

Unfortunately, the video rental industry is proving the exception to that rule.

The nation’s largest video rental chain, Blockbuster, is close to bankruptcy. Stock trading was halted briefly last week when values fell 86 percent; yesterday the stock closed at 41 cents a share. That’s a steep fall from the $30 high seven years ago.

Here in Falls Church, only one video store remains: Hollywood Video in the Broadway condominium on Broad Street. Unfortunately, times are tough all over. Hollywood Video’s parent and #2 retailer, Movie Gallery, filed for bankruptcy protection in 2007 but emerged successfully last May. Recovery required closing more than 1,000 underperforming stores. In January, Movie Gallery consolidated its distribution centers, cutting another 200 jobs. Most recently, last week CEO “Gabe” Gabriel resigned after only 10 months on the job. The resignation came with the news that Movie Gallery lost another $39 million in its last 3-month reporting period.

Industry observers warn that stand-alone, brick-and-mortar video rental stores are doomed by a triple-whammy of innovative competitors: Internet downloads, TiVO and Pay-per-view cable, and – the biggest threat for the moment – Netflix.

In-store video rentals may only survive as secondary ventures – for example, “Redbox,” the self-service video kiosks developed by McDonald’s and now available in the Giant grocery store on Broad Street. The selection is limited but the price is right: $1 a day. (McDonald’s, by the way, decided to get out of the video rental business and sold Redbox last month.)

Hollywood Video is the Broadway building’s largest and oldest commercial tenant. Sadly, even if the local store is viable (figures are not made public), its fate rests with national owner Movie Gallery.

Meanwhile, another DVD movie outlet in the City is going great guns: Mary Riley Styles Public Library. “Rentals” are free to City residents, while all others pay cash ($1 per day).