A publication of the Centre for Advancing Journalism, University of Melbourne

Going, going . . . Can video stores possibly survive the digital onslaught?

Video rental stores insist they will survive the digital onslaught and thrive, despite industry analysis that paints a doomsday scenario.

Words by Bec Zajac

Already reckoned to be on their last legs, the decline in the number of stand-alone stores is predicted to accelerate, plummeting from around 1000 across Australia to just 43 within five years, according to the market research group IBISWorld.

Its latest analysis concludes that just nine bricks-and-mortar stores will still be standing in Victoria in 2017, with three in South Australia, one in Tasmania and none in the Northern Territory and the ACT.

Most stores will have given way to digital movies-on-demand, kiosks and vending machines in shopping hubs, and illegal movie downloading via the internet.

“Many stores are quite simply going to be replaced by kiosks, which entail lower staffing and rental costs,” IBISWorld analyst Craig Shulman said. Adding to the threat were Pay TV, iTunes and video piracy.

Digital movies-on-demand, kiosks in shopping hubs and illegal downloading via the internet are killing video stores.

IBISWorld expects video store revenue in the current financial year to be around 18 per cent lower at $660 million. It predicts that slide will continue at around 12.4 per cent annually over the next five years.

Despite the grim outlook, two independent store operators in Melbourne’s inner-north said their businesses were still turning a profit and they expected to continue making money.

The stores, in Northcote and Fitzroy, have survived because of the depth of their collections and the owners’ “curatorial” expertise, the operators claimed, giving them a competitive advantages over online technologies and kiosks.

“There have certainly been challenges,” said Robert Jones, who has owned the Northcote store “Movie Reel” for 14 years. “But if it wasn’t still profitable, I wouldn’t do it.”

Jonathan Mallalieu, the owner of “Video Dogs” in Fitzroy, said his store offered services that the internet could not. 

“Even with fast broadband, people still can’t download all the films of Yasujiro Ozu or Eric Rohmer or Federico Fellini, nor can they see them on one shelf where it might occur to them to watch them,” he said.

“People appreciate a curatorial manager picking the best of the crop on their behalf and the internet just can’t do that beyond a few ‘You Might Likes’ on Amazon.”

Dr Brent Coker, a Melbourne University business lecturer whose research interests include online consumer psychology, agreed that bricks-and-mortar stores still had “an edge” when it came to ease of choice.

“People appreciate a curatorial manager picking the best of the crop on their behalf.” — store owner, Jonathan Mallalieu

“One of the benefits of a video store is it enables comparison, because you’re staring at a wall of available options and it’s easy to whittle down to the one you want to see,” he said. “On a computer screen, it’s a lot more difficult.”

But according to Franchise Entertainment Group, which owns the Blockbuster and Video Ezy chains, and controls 46 per cent of the rental market, a traditional business model is not the way forward. Instead, it is installing kiosks around the country and developing its online retail arm in recognition that the future is a fragmented one.

IBISWorld’s Mr Shulman agreed. “The new technologies are seen as incredibly convenient and consumers are expected to take advantage of that to a higher degree.”

Even so, operators Mr Mallalieu and Mr Jones believe going into a video rental store remains a big drawcard for consumers.

“The internet can’t ever offer a place where you can mill about and talk about movies with real people,” Mr Mallalieu said. “And who wants to stay at home all the time?”

Dr Coker offered qualified agreement.

“There are always going to be people who enjoy the ritual of shopping, who like to go to the store just for the experience of going there,” he said. “But I don’t think that’s enough for video stores to survive.”

That said, video stalwarts such as Mr Mallalieu and Mr Jones aren’t thinking about the end just yet.

“There’s been that talk for a long time, but right now customers still have faith in what we do and what we mean to them, so I think we’ll keep that up and we’ll still be here tomorrow,” Mr Jones said.

About The Citizen

THE CITIZEN is a publication of the Centre for Advancing Journalism. It has several aims. Foremost, it is a teaching tool that showcases the work of the students in the University of Melbourne’s Master of Journalism and Master of International Journalism programs, giving them real-world experience in working for publication and to deadline. Find out more →

  • Editor: Jo Chandler
  • Reporter: Jack Banister
  • Audio & Video editor: Louisa Lim
  • Data editor: Craig Butt
  • Editor-In-Chief: Andrew Dodd
  • Business editor: Lucy Smy
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