Buying a DVD Shop

The film and computer game rental industry has changed dramatically in recent years.

When the VHS video recorder became a fixture in British homes in the 1980s, the industry boomed. And as home cinema systems got much closer to replicating the auditory and visual quality of cinemas in the 1990s, film rental continued to present a popular alternative.

The noughties have brought equally as significant developments, and the ever-quickening pace of technological change makes it hard to anticipate the fortunes of the industry in the future.

DVDs are likely to be ousted as the dominant format sooner than it replaced its predecessor: a new format war is brewing between Sony’s Blu-ray discs and the Toshiba-backed HD-DVD, which has been compared to the VHS-Betamax battle of the early 1980s.

As a DVD rental store owner, you might have a difficult choice to make when the formats are released: do you stock Blu-ray discs, HD-DVD discs, or both?

The good news is that the latest formats have a new encryption code to stop piracy, which would boost the DVD rental market. That this code will be effective, however, is far from certain.

Yet the whole concept of storing films and music on individual discs could eventually look outmoded. People are now able to download films straight onto their computer, phone or even iPod.

But whether people want to watch full-length movies on these mediums is questionable.

Manufacturer of automated DVD rental machines Original Video is unperturbed by the threat.

“We feel that traditional rental will continue to be the preferred method to watch movies,” says a representative, “as the issues of internet downloads, such as the slow speed of download and size of movies, make it inconvenient to the consumer at present.”

“Fully automated business”

There’s no reason why video rental shops should be only a victim to technological advancement. You could do something different with your video store by buying automated DVD rental machines from Original Video.

“The beauty of our system is that once our machine has been introduced into its desired location, the machine operates as a fully automated business,” says the company’s representative.

“The full process of registering at the machine, along with rental and returns, is all performed at the machine without the need of staff interaction – meaning it can be used 24 hours a day.

“This not only saves the cost of staffing, but our credit and debit card system also ensures that the machine is highly secure, as late or unreturned movies are automatically charged.”

Saving time is usually among the benefits of new technology – and these automated machines are no different.

“As a majority of problems are solved on the internet, owners need only dedicate an hour of their day to running their business.”

Original Video is technically not a franchise – it’s a manufacturer – but it offers many of the benefits of one.

You can find other DVD rental franchise opportunities on FranchiseSales.com. The usual franchising benefits apply: brand recognition, and help with your business plan, location, shop fitting, marketing and installation of stock, as well as the use of the franchisor’s proven systems.

Online rental-by-post

Another option is to buy an online rental-by-post business, if available. Pioneered by Netflix in 1999, rental-by-post now accounts for 25% of the market, and according to research conducted by Screen Digest DVD, this will double by 2009.

LoveFilm, which recently merged with its biggest rival, Screenselect, is the biggest player with half of the market.

The advantages of postal rental are that the customer can use a search engine to find the DVDs they want quickly without needing to trudge down to a shop, and they can usually keep a DVD for as long as they want, without paying any charges for late returns. Then of course there’s the added discretion afforded to people who want to buy adult titles.

Many rental-by-post companies offer free trials. The also have centralised storage areas, so they can maintain a much bigger catalogue than a conventional shop.

Much of the floor space in conventional stores raises very little revenue: 50% of rental store revenue can be raised from as few as 25 titles in a year. This leaves shop owners with a large amount of underperforming stock once a film’s popularity wanes.

How has the conventional market responded? Is there still a place for the walk-in rental shop, and if so, how will they need to adapt to still compete?

Of the big market players, Blockbuster adapted well, incorporating an online element to its business. At the other end of the scale, Silverscreen went into administration in March 2006.

Pinch of salt

Conventional stores’ share of the market has declined, and they are now a less familiar site on the high street than a decade ago.

But one should take the doom-mongers with a pinch of salt, because, as 24 Self Video says on its website, “people were talking about the death of rental 10 years ago”.

And remember, you can buy just about everything on the internet, but the high street is hardly deserted.

Original Video doesn’t even see online rental as a threat.

“We see it as evidence that the DVD rental market is a huge one with great potential,” says their representative.

And a significant part of that, he says, is sewn up by the conventional stores: spur-of-the-moment customers.

“Consumers have the option of renting on impulse, which rental by post does not allow.”

People who only want to rent two or three films a month will not benefit from the all-you-can-rent-in-a-month deals offered by the likes of LoveFilm, although some providers do offer pay-per-disc deals.

Unfortunately it is high-revenue customers – habitual renters – that are migrating to online retailers.

Regardless of its relative profitability, a conventional store can be fulfilling. If you love film, then you get to discuss it face to face with customers, offering opinions on the latest releases and directing them to obscure gems. This is something the online companies cannot offer.

Why not harness your specific knowledge of film by turning your shop into a specialist store, buying stock in niche categories such as art-house, film noir, foreign language films or even computer games.

It’s definitely worth checking how many computer games a business for sale has in its stock and how up to date this stock is, as computer games represent a significant revenue stream.

Incorporate an internet cafe

Many modern-day video-rental store owners are distinguishing their service in ways that the new competition cannot. You might, for example, incorporate an internet café into the shop. This is more likely to work well in somewhere like central London, where tourists and foreigners living in the capital for a short period are not likely to have a computer, or in low income areas, where fewer people will be able to afford to buy one.

DVD rental can, and has, been combined with all sorts of services: coffee shops, newsagents, off-licences – even sunbed centres. Conversely, Original Video’s less labour intensive DVD rental machines can provide an extra revenue stream to a range of different types of shops.

Although the industry is a rapidly changing and unpredictable one, you can predict one thing with certainty: that a huge proportion of the population will want to watch films and play computer games at home for some time to come.