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Britain’s second-biggest DVD rental chain sounded the death knell for the £330 million market yesterday after saying that it will “substantially” miss targets this year after a dismal Easter.
Shares in ChoicesUK fell 50 per cent and Anthony Skitt, its chief executive, said that there were unlikely to be any standalone rental stores on the high street in five years’ time. He told The Times: “Clearly, standalone stores are becoming less viable. That’s as plain as the nose on your face.”
A sharp downturn over Easter, sparked by the warm weather, meant that ChoicesUK will accelerate plans to close or sell 70 loss-making or less profitable stores. This will leave the chain with 120 sites.
Mr Skitt said that even these would have to put more emphasis on computer games and confectionery to survive. “Business died a death over Easter,” he said.
The gloom comes just two weeks after Apollo Video Film Hire, the country’s third-biggest rental chain, went into liquidation. Blockbuster, the market leader, is also understood to be considering closing 24 of its 700 UK outlets. A spokeswoman for the American-owned chain refused to comment.
Britain’s video and DVD rental market has gone into meltdown over the past two years with the growth of online rentals and internet film piracy.
Supermarkets and high-street retailers such as Virgin and HMV have contributed to the decline by slashing the price of new DVDs. At its peak in the late 1980s, film fans were renting 230 million videos a year. Since 2001, the value of the market has fallen from £470 million to £330 million.
ChoicesUK, which was formerly Choices Video, has diversified and now computer games account for 40 per cent of its sales. The group also supplies DVDs and videos to 4,000 convenience stores such as the Coop, Welcome Break and One-Stop. Mr Skitt said that this was likely to be the main way in which the rental market would survive.
ChoicesUK was expected to accrue losses of £2.6 million in the year to June, but analysts said yesterday that the chain was more likely to fall £4.6 million into the red.
Mr Skitt said: “We can put on £1 million in the week up to Easter, but the sunny weather meant there was a monstrous drop-off in rental volumes. Global warming is going to play to certain industries and ours is not one of them.”
He insisted that Lloyds TSB, the group’s banker, was being supportive.
ChoicesUK would not pursue an internet-based service, the chief executive said. It sold an online venture to Lovefilm.com three years ago and Mr Skitt did not think that the business model, where the firm sends titles through the post, would work in the long term.
Blockbuster launched its own online service in the UK five years ago. In the United States it has been considering a move into digital downloads to combat the growing threat of Netflix, America’s largest online DVD rental firm.
In view: UK video and DVD rentals
1986
Volume:233 million rentals
Market size:£284 million
Most popular: Police Academy 2 (5 million rentals)
1996
Volume:175 million rentals
Market size:£386 million
Most popular: Braveheart (4.2 million rentals)
2006
Volume:116 million rentals
Market size:£330 million
Most popular: Flight Plan (1.1 million rentals)
Source: MRIB
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I own an independent small DVD store in the North East UK. We currently operate with an average of 7000 titles at any one time. We also only charge 2.50 for all new releases for 2 days. I personally do not think this price is unreasonable - if anyone can tell me where else they can see the latest (legitimate) DVDs for the same price i'd be very grateful.
KEITH PORTER, SOUTH SHIELDS, UK
Just a quick rebuttal to the first comment on here - Choices did not bend to the will of the studios/distributors with their two-tier pricing first - it was Blockbuster who capitulated and signed an agreement with Warner, leaving Choices and others little option but to follow suit or be left behind, and paving the way for other studios to adopt the two-tier pricing system. It was the independants who were truly betrayed by this, but what other option did they have?
Anne, Colchester,
Choices got exactly what they deserve.
They betrayed Blockbuster and the others when the fight to save the rental business from the US film studio plan to destroy it took place.
just look at all those cheap DVD's you are buying, most say "NOT FOR RENTAL" on the back.
Hollywood paid for more inspectors to prosecute rental shops than they ever did to chase pirates.
Just like that dumb old Turkey, Choices accepted that extra handful of corn from the hollywood hookers and voted for Christmas.
Chris, london,
The people to blame for the demise of the vidoe/dvd rental market are the distributors, they have held the hand of the big boys like blockbuster and the like, whilst making the good little independant shop cross the road on their own with more chance of being run down by a big bus. Blockbuster have had the pleasure of being given films for free and sharing the rental with the distributors, whilst the poor little independant has had to pay around £60 per film for the rental version on the same day. My local video store only charge £2.50 for a new release and are quite amazingly still here. The hole internet renting idea is a con to. Instead of offering the independents thousands of free dvd's on a shared rental system so that they could supply there customers with this kind of service you can log on to boots the chemist website and rent dvd'd from them. I hope that the pairates wipe the floor with this industry and take away a massive percentage of the distributors profits. ha ha ha ha
ian, wales,
The online DVD rentals don't have too bright a future either it seems to me. I can watch all the latest run movies on my cable's Videos On Demand system,for $3.99 per film. I don't have to order,mail back or pay a second bill. It's all factored into my cable bill.
Eileen, Indiana, USA
The business model for movie rental companies is out of date, based on a time when these were relatively high value items. Customers increasingly have a choice between renting for £3.95 or buying for £9.99, at which time they decide to buy, either at that price or when it becomes even cheaper. This is unsustainable for the rental companies - have they been in denial? In such a market they should be renting the DVD for £1 and making their margin on the refreshments.
Austin, London,
In Bath we have a new DVD rental shop called 24 Self Video that is self service and open 24 hours a day and each film can be rented for £1.99. This is the future as it has low staffing costs and holds lots of titles in a small shop. Choices have only themselves to blame for poor service and high prices. Blockbuster are little better and are likely to experience the same fate.
Steve Hollyhead, Bath, UK
I'd happily rent more DVDs if the rental fee was less. Sale prices are such so we don't have to wait too long before we can buy the DVD for £5-£10 so why rent it now for £3.50 a day (or more when we forget to take it back)?
I'll probably start using movie download services when they're cheap enough (50p-£1 a movie) and I have an easy way to transfer them from PC to TV - I don't want to watch them on my PC and as my PC is noisy I don't really want it on to stream the movie from. I also don't want the movie download expiring after a couple of days nor do I want to have to subscibe to satellite or cable nor be tied into using a BT home hub etc.
Richard, Leatherhead, UK
Hi Adrian totally agree with you. In much the same way as you used to rent loads of films, only 5 years ago I used to go to the cinema virtually every week. Now it's once a month or less. Why? Cinema tickets are too expensive and the films being shown are terrible.
So like you I content myself watching repeated films and spend my money on eating out at better quality restaurants.
Stephanie, London, England
In China everyone buys pirate DVDs.
Good quality for about 50p, everything from the latest Hollywood stuff (months before it plays in the Uk) to Euro cinema classics like La Dolce Vita, Divorce Italian Style, Au revoir les enfants etc.
There must be at least 100 million pirate versions of Western films and documentries sold in China each year, at least.
They do this cos 1. cheap 2. available all over the place whereas I don't see many (any) places selling non pirate ones 3. they don't give a toss about intellectual property
Maybe if cheap official films were as easily available people would stop buying pirate DVDs?
Kevin Lax, Shanghai, China
I cannot see how the owners of such companies like Blockbuster's and the like have not prepared themselves for this. Instead, from my experience, the have chosen to counteract their drop in profits by upping the rental prices. I occasioanlly rent films and over the last few years my mouth has hit the floor when i go to pay. The prices now are crazy, almost reaching the cinema price. It is obvious that the rental market in shop form has no future. The internet is an obvious cause but the growth of digital tv , where films are a few clicks away, is sure to see to the end of rental shops.
Matt Connolly, Bradford, uk
The sooner the "Big Guys" are in trouble the better chance for the ordinary guy in the street..just check out what HDMI means..and then look at HDCP..and MI..you are slowly being squeezed into accepting what they want..total control on what you download..watch..invite friends to watch..all in the pursuit of greater profit..at our expense..you buy something and it still isnt yours.Sorry for the employees but cant wait till"it "begins to bite
david, Barnsley, S.Yorks
How can DVD shops compete with the growth of the internet? No late fees etc the contract is so much more relaxed. The shops are only realy any use if you are an occaisional watcher. Even then most internet companies allow you to freeze your account.
Internet companies have a central base and take a monthly fee their costs are sorted and largely guaranteed.
Compared to shops which rely on random trade and a local hub and shop location. That business model is so much more expensive.
In the long term they are going to find it hard to survive unless they come up with something original.
Times change.
Agnostic, Kelso, Roxburghshire
Frankly, this will teach them for the years of ripping off consumers. I use an online rental service now and whilst it's service has admittedly been hit and miss, i still rejoiced when my local video shop shut down and became a Costa. I have no sympathy whatsoever with these companies and wish their march towards obscurity ever faster.
Scott, Manchester, UK
I don't know if it's the same in the UK as the US, but in the US, rental stores are basically thieves, renting many DVDs that only cost $6-12 to buy in a store for $5 a pop. Their profits were massively inflated to begin with, so I don't feel sorry for them at all.
JeremyR, St. Louis, USA
Why don't DVD rental companies offer a complete package online rental delivered to your door with the option of going to your local store and renting something off your wish list included in your subscription fee. This way you could watch exactly what you want when you want, no late fees and it would be cheaper than buying the DVD & Sky/Virgin 'on demand' movies. Surely everyone wins.
Susie, london,
why rent from the likes of Blockbuster when you can buy an unscratched, un-fingerprinted copy in Asda or online for about twice the price and be able to watch it when and as many times as you like without late fees. Virgin/Sky etc also all offer movies on demand, but they are still expensive compared to buying the DVD.
Rental & on-demand prices need to be more realistic to bring people back
Adrian, Edinburgh,
In Canada, a free bottle of Pepsi/Coco Cola was given or available when rental of 2 or more DVD films. In London, it was normal to have cheap rental for fortnight, with sundden increase of £3.50 per DVD returnable within 24 hrs. No suprised therefore that piracy is the reason given for the lack of profit.
Hugh Miller, London UK
hugh miler, london, UK
From the statistics provided at the foot of the article, it is clear that one factor for the ´meltdown´ is the that the price of rental has increased dramatically. This should have been acted on years ago.
Dominic, Oxford, UK
I used to rent a lot of films from Choices. Why don't I now? The answer is simple: there are just not enough good ones being made. Rather than spend money renting films that turn out to be useless, I have joined millions of others in turning to SKY. My daughter can now watch Disney channel to her hearts content and I get to see repeats of 'Lovejoy' and other favourites or alternatively watch the SciFi channel. My wife watches Poirot and Midsummer Murder repeats. Poor old Choices has become almost irrelevant to us as a family.
Adrian, Sevenoaks, England
So called internet film piracy is, as usual, being made a nice easy scapegoat here. It has been proven in various places that copying media over the internet for free has in fact caused a rise in sales of the physical media as people desire to own a high quality version with packaging, of media they enjoy.
The reality is that internet based technology and consumer desire is simply superseding an older, less desirable technology and business model. The answer to "illegal" internet file sharing is to embrace it whole heartedly and build a business model around it, and indeed encourage it. This is the one and only choice as EMI and Apple have recently realised with DRM-free music. People will always find a way to share files en masse, and this will only grow in the future, attempts to stop or outlaw it, and attempts to deploy DRM are utterly futile.
Alex Kerr, London, UK
Not so sure about the internet model not working. I rent about 2-6 DVDs a week for a flat fee from an online video rental shop, but I only rented 1-2 a month when I had to go to a physical shop and choose from what was in stock that day. The range is also much better than from a traditional rental shop, and I would assume the saving on the expense of so many physical shops is a significant reduction of overheads for an online service which can be anywhere in the country.
John Bailey, London, UK