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November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
Friday, February 13, 2004
The Long Slow Decline of the Video Store
Two big announcements this week drove home the point that the video rental business is in a long slow decline.

First was Comcast's offer to buy Disney. One of the main reasons given by Brian Roberts, Comcast's CEO, for the merger is the desire to have access to Disney's media content for delivery to consumers through cable service. As he pointed out in a television interview on CNBC TV, consumers used video-on-demand an average of 13 times a month. Who needs to rent movies when you can get them delivered to your living room via cable?

Then there was Viacom's announcement that it was getting rid of its controlling stake in the Blockbuster video chain. The reason: declining revenues, in part due to competition from video being made available over cable systems or the Internet.

A Forrester Research report supports the bleak long term outlook for video rental stores. This report (free by the way) paints a picture of a future where computers, media, networks and broadband converge. In the future, we will be watching movies on computers, delivered via cable TV signals over our home network. In that future vision, there is no need for rented videos.

Predictions suggest that video stores will be around for another decade, because it will take years for consumers to migrate completely over to newer technologies. But the video rental store's heyday has come and gone. What's left for Mom and Pop video stores? Well, this is not a good time to make any new investment in video franchises or open up video rental stores, unless you are an expert at milking a declining market.
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