Video rental stores were a huge market in the 1980s, offering an affordable way for viewers to see movies at home with VCRs costing in excess of $1,000 and VHS costing as much as $100. Gary Messenger remembers starting the first North American Video store in 1979. "It was like a club," he recalls of North Carolina's oldest video rental company. Membership cost $50, and rentals were $4.99 for three days.
Today, North American Video, now run by Chip Williams, has reduced its operations. According to Messenger, it had 16 stores at its peak; today, it has seven, with its main office run out of the store off of Buck Jones Road. Williams, who bought the North American chain from Messenger in 1994, says that he's shut down his corporate office in Cary, let go three of his five corporate employees, and shut down a store in Knightdale in 2005. "It was losing money," he says bluntly.
Competition from chains such as Blockbuster and mail-order services such as Netflix, along with the decline of VHS and the popularity of DVDs, has forced many independent stores to change their way of doing business. "A lot of independent retailers have dropped like flies in the last five years," says Stacy Gamble, director of operations and movie buyer for VisArt Video since 1988. "We, thank God, are not one of them."
Williams says that due to the "cyclical" nature of the video rental business, he changes his business plan every six months. "Last year, I almost went out of business," Williams says. "This year, I'm profitable. My revenues are down, but my profits are up, because I reduced my expenses." The downsizing has worked—Williams says that all his managers received bonuses this year.
Jason Jordan, who has run Avid Video in Durham for 10 years, says that competition hasn't hurt his business. "I've seen increases in our rentals every year," Jordan says. He's initiated some new policies, such as a pre-pay that allows 20 rentals for $50, and has enjoyed brisk rentals for TV-on-DVD series such as Sex and the City.
Out-of-print VHS films and art films have further helped Avid distinguish itself from the likes of Blockbuster. "There are thousands of titles that haven't come out on DVD yet," Jordan says. "We tend to be a library-type store, rather than a new-release store." It's also helped Avid fend off competition from chains such as Wal-Mart, which carries many new releases at low prices but offers few Criterion Collection and art films.
Avid Video and VisArt Video both enjoy built-in audiences from nearby universities, though VisArt had to close a store near UNC in 2004, citing the high rent and limited space on Franklin Street as the problem. "When stores like the Gap have to move out, it makes it very hard for indie stores to survive," Gamble says.
Not that the majors are doing that well themselves. Blockbuster has faced numerous troubles since failing to jump on the DVD and home-delivery bandwagons early on, while Netflix has faced accusations of giving preferential shipping to customers ordering fewer discs.
This may prove beneficial for some local shops; Williams says he's gained customers from Blockbuster and Movie Gallery closings. Customers who subscribe to Netflix may also find themselves returning to video stores for something a mail-order service can't offer: human contact. "You're not going to get movie love from a mailbox," Williams says.
And new formats such as HD-DVD and Blu-Ray haven't become financially viable enough to result in a change in what stores stock. "I think until you get one decisive format, you're going to see the studios kind of shying away from putting a lot of films out on that," Jordan says. "Most people aren't going to go out and spend $800 or $1,000 on a HD-DVD player."
Jordan is optimistic about the future of video stores. "Ten years ago, when I was getting into the business, all the trade publications were talking about the doom of video stores due to video on demand, and you still don't see that to any great effect," Jordan says.
Though the widespread availability of broadband means competition from downloads, Messenger says that going into partnership with the companies providing these downloads may prove to be the next evolution for video stores. "The company and the individual that is smart enough and quick enough to develop a model for that will have a successful business for the next 10 or 15 years," Messenger says.
For Williams, the near future seems secure after surviving the contraction of his video operations. "One day, video stores are going to go out of business," Williams says. "But it's not today, it's not this year, and it's not next year."