Hot competition for DVD rentals
Browsing the shelves for a DVD to rent may soon be a thing of the past. Photo: Luis Enrique Ascui
IT WAS once a familiar ritual on a quiet night, meandering up and down the aisles at the local video shop. But the bricks-and-mortar movie store may soon be history as the industry battles intense competition on several fronts.
Movie rental stores are losing market share to the free-to-air digital channels, digital services such as Telstra's T-Box and pirating. And for those who still want to take home a DVD, the choice has rapidly expanded to include ordering online and collecting either in person or through the mail and renting from vending machines.
The industry's biggest player, Franchise Entertainment Group (FEG), has moved quickly, recently investing $15 million in 1000 DVD vending machines from the US and buying the established RedRoom DVD kiosk business.
Analysts estimate FEG, operator of Blockbuster, Video Ezy and several online retail sites, will close up to 200 stores in the next couple of years, with dozens already closed across the industry.
FEG is clearly rewriting its business model, with the DVD kiosks aimed at both complementing the bricks-and-mortar stores, for example offering 24-hour access, and staring down competitors. FEG's founder, Paul Uniacke, says he plans to put many of the machines close to rival stores to snare some of their business.
Describing the shift towards kiosks and vending machines as ''future proofing'', Mr Uniacke says the industry needs to be continually improving and investing in new technology.
The best-known player in DVD vending machines up to now has been Oovie, started in 2006 and based on a successful US model. Now owned by Hoyts, it has about 400 machines around Australia, mostly along the east coast. According to co-founder Ian O'Rourke, the key advantages of the vending machine model are convenience and price.
''The traditional method of getting a DVD … get in the car, search for a park, look in the local video store, drive home, and then some poor sod has to do it all again the next day. In our model you're already out doing something and see the vending machine, nothing on TV tonight so great … you can return it to any other machine in the chain, the one near work or wherever. You can check online for the contents of any machine and it's cheaper.''
The financial advantages of the vending machine model are underscored by the biting cost of retail rents in Australia. As Mr O'Rourke says, there's a good reason you rarely see video stores in shopping malls: they can't afford the rent.