Is there room for both an independent video rental store such as Video Vault and a
large chain such as Blockbuster in this market?
The video rental market has been facing two main difficulties: increasing of internet users,
and changing in technology. Back to 1980-2000, people has much of choices when they
want to watch movie. VHS movie was ruling the whole industry, since it is the only access
to movie library. At that time, an independent video rental store could easily make a living.
However, everything has changed since internet can be easily accessed by everyone. The
market has gone down drastically, when all the music tracks and movies can be
downloaded at home. Independent video rental stores such as Video Vault would close up
since they could not catch up with the rate of changing in technology (from VHS, DVD to
blue ray DVD), and competition from big chain stores like Blockbuster. Home theater
users today demand high quality of movies. More importantly, the market has shrunk a lot,
and that the main reason which killed the market. To survive, Blockbuster has done two
things: cutting down the middle man, and technology catching-up. Even though,
Blockbuster is still using Rentrak software for their data system, it started to deal directly
with Hollywood for revenue sharing. As result, 90% of revenue comes from this revenue
sharing sources.
If you were managing Video Vault, how many copies of Heist, A.I., and Zoolander
would you stock?
With floor space at 750 square feet, Video Vault currently has about 10,000 units contain
8,000 titles of inventory, and 700 of which were DVD formats.
Which means that Video Vault currently only has 7% of the units are DVD formats, the
rest are all VHS. This shows that over 90% of the items in the store are still VHS format;
however, the cost of DVD format is cheaper, quality is better. Currently, maybe still not the
main formats people using to watch video, but Peaslee and St. Angelo should pay attention
on the future trend and enhance the percentage of DVD format in the store.
The renting fees in Video Vault are as follow,
There are 6,000 registered customers and half are active customers, which mean that there
are 3,000 active return in to the store. Moreover, in 2001, the Video Vault had 53,235
rentals, with two-thirds at the $4 price, and one- third at the $3 price.
