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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