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VIDEO RENTAL INDUSTRY

11/7/2011 11:11:00 PM

INDUSTRY HISTORY 1. The video industry began in 1978 when a store called the Video Station opened in Los Angeles by George Atkinson 2. Atkinsons very first video rental store had created the template for the companies such as Blockbuster video chain and laid a crucial part of the foundation for what is now an $8 billion-a-year industry. 3. The idea of the video rental industry is that most people dont want to collect movies. They just wanted to see the once. It soon changed from being as sales-oriented to a rental-dominated industry. 4. Blockbuster was the biggest chain by far in 1994 with 2,800 outlets. It was known as the McDonalds of the industry. 5. The video rental business in now described within the industry as mature. Growth has plateaued with consolidations Small stores are being forced out of business Looking towards online rentals and quick-stop kiosk to reinvigorate an industry that has last $2 billion since 2001 INDUSTRY OVERVIEW Experience decline in demand due to time-strapped consumers who are weary of high rental costs and late fees. Its a rare 20-year-old business that gets a chance to reinvent itself the way video rental has through online subscription services. But the appeal to the consumer of unlimited rentals with no late fees is now clear. Netflix opened its distribution center in Boise area in 2008. Redbox machines are all over the Boise-area Albertsons, McDonalds Illinois-based company Units hold more than 500 discs, 100 to 150 new releases. -> Helped rebuild the rental market Competitors Netflix o Allows consumers to rent movies over the Internet and have them delivered to their home.

o Began offering online rentals in 1999, charged a fixed monthly fee and subscribers could keep movies as long as they wanted. o While Blockbuster lost half a million online customers from July through September, Netflix cut prices and added 286,000 subscribers, pushing it over the 7 million mark. Blockbuster has just over 3 million subscribers. o Netflix costs cheaper and doesnt have store exchanges. Redbox o In just 6 years, has become a leading choice for movie renters, generating its parent company, Coinstar Inc., $271.9 billion in revenue last quarter. o Locates kiosk where consumers are already shopping, saving them an extra stop in their day and appealing to consumers impuse. o In LA county, Redbox operates 447 kiosks at 408 retail locations. 177,102 movies are disbursed weekly. o Along with Netflix, its part of a one-two punch that has knocked out Hollywood Video, Blockbuster, and local momand-pop shops. o Has created an incredibly efficient business model that consumers love. o Is reportedly in negotiations with Apple on a deal that would give it access to Apple TVs online services. o The future of the medium is moving online. In the next five years most DVD rentals are going to be obsolete. Competitive Landscape o Demand is driven by personal income and timing of popularity of new movie releases. o Decrease in personal income led to a drop in demand o Dependence on consumer spending o Declining video industry revenue

Buyers Video rental customers include almost the entire US population: about 80 percent of US households own a DVD player.

Consumer product rental customers are generally consumers earning a weekly paycheck who may not have credit Suppliers Heavy reliance on Movie Distribution Window for revenue. Sell-through pricing decrease changes in studio pricing policies increase competition from mass retailers such as Wal-Mart and Target, which often discount the tittle further to generate more store traffic. Barriers to Entry Relatively easy to enter the market Does not require much start-up costs Computerized Inventory Systems Radio Frequency Identification (RFID) to track movies Business Trends Industry consolidation Legislation governing video game content Radio Frequency Identification Internet rentals

11/7/2011 11:11:00 PM

11/7/2011 11:11:00 PM

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