The post office has plenty of spare capacity to get them to your door, and I doubt it is too far from the Netflix center to the entry point of the normal post office system. Plus,. for me at least, I despise video stores.
Electronic distribution will catch on, but not until it is common to be able to stream movies from an internet connection to a large screen TV. Some day someone is going to build a set top box with a disk and wireless internet access which will simplify downloads.
Blockbuster can change their model in several ways to maintain efficiency.
Here’s one of the big problems: A movie rental today is only about half to a third the cost of buying the movie outright. In the case of some older films, that’s not even true (our local electronics big box retailer has a huge selection of movies for sale at $9.99 and below, including some fairly popular movies bundled in 2-packs for $9.99, which is cheaper than renting). Add in the inconvenience of having to return the movie, plus the occasional late fees, and Blockbuster is getting squeezed heavily by the sales channel.
Then there’s inventory cost. A new movie comes out, and blockbuster has to order a lot of copies for the initial rental frenzy. A week or two later, and they’re heavily overstocked on that movie. So they sell them for half price. But that puts the sales price perilously close to the rental price, driving some customers to just wait and buy the used copies (I do that all the time).
The cost of inventory and floor space means Blockbuster can’t afford to store much of the older catalog of movies. That drives potential customers to the internet, where the selection is much better.
I also believe that movies in general are getting squeezed heavily by the improved quality of television. HD is much more prevalent, and the quality of television shows has gone way up. The wide acceptance of DVRs also eliminates one advantage movies had - you could watch them when nothing was on. But now, there’s always something to watch, because your DVR is usually backlogged.
That’s the story for me. At one time, I was a major movie renter/purchaser. But then I got an HD cable box with a PVR. I always have 10 hours of backlogged material on the DVR, usually including some great movies from one of the movie channels. Between that, the great HD content on HD-NET and Discovery, plus great TV shows on HBO and Showtime, I’m never in a position where I have nothing to watch. In fact, my biggest problem is that I have to erase shows I wanted to see because I can’t afford the time to watch them all. So I don’t rent movies. I’ve watched one rented movie in the last three months, when I used to watch maybe two or three a week.
So blockbuster is getting squeezed by the internet, television, and retail sales. And their business model doesn’t have much room to absorb the pressure. Change the price of videos by a couple more dollars, and blockbuster’s niche is completely gone.
So how could they survive? Well, first of all they could get rid of their inventory and go with an electronic distribution system to the stores. You still go into the store to get your movie, but the store doesn’t stock them. You pick your movie, and they download it from a hard drive to an encrypted device you play at home. You can ‘rent’ as many movies as you want, so you can stock up for a couple of week’s worth. As soon as you start watching one, you have one week to finish. You never have to worry about the store being out of stock. You can find almost every movie ever made, because with electronic distribution they have access to ‘the long tail’ of movies.
So… Do you want to order your video from Netflix and wait a few days to have it show up in your mailbox, or would you rather just stop at Blockbuster on the way home and grab a couple of movies? With electronic distribution cutting inventory costs and floor space, Blockbuster can lower their costs dramatically and cut rental prices. Make it 2.99 for new releases and .99 for back-catalog movies, and people will flock to the store.
But that’s just a stop-gap, really. Eventually movies will be directly available to the home, in high-definition, at a reasonable cost. And that will be the end of blockbuster as a bricks-and-mortar store. Maybe they can stay alive as a company by moving to the internet, but that remains to be seen.
Upthread someone said that renting a new release from Blockbuster costs five or six bucks, so lowering the cost to $2.99 would be a sharp reduction. But I don’t expect them to do it. The reason is that high cost for a one-time rental is meant to encourage customers to subscribe to the monthly membership, which at $18 for three movies out at once is a better bet even if you’re seeing just one movie a week (although I suspect that most customers rent movies even less frequently than that). But the company prefers to have members paying month after month. (I think it’s similar to magazine subscriptions, which are low cost per issue compared to newsstand purchases.)
In Houston, it’d be no great loss; they don’t have squat. When I rent, I drive past the Lackluster near my house to get to the Hollywood two miles away.
Just a data point, older movies can be rented 2 for $5. I recently rented Shaun of teh Dead, when a friend mentioned the movie. It was on my “to be seen” list, but I forgot about it. When I went to checkj it out, the cashier said that I could rent another older movie for $5 toal. So I picked up Porco Rosso
Brian
As for Blockbuster–I’ve always preferred local places, although it’s still hard to beat Blockbuster for convenience. If you’re ever in San Diego, Kensington Video–right next to the Ken Theatre, on Adams off the 15–is amazing for obscure foreign and indie films. You can find anything there.
Having worked in a Borders in the same mall as a Borders Express, I can tell you that the Express is the exact same store, only smaller.
I’m not so sure. Cuban bought Landmark Theatres, the entire idea of which being that he would use his immense wealth to keep the otherwise unsustainable “movie buff” theatres alive. The aforementioned Ken Theatre owes its very existence to Mark Cuban, I’m sure, and San Diego is better off for it. San Diego was losing awesome independent theatres at a record rate until Cuban stepped in and saved the only three left. That said, it’s true that you can buy DVDs of Magnolia movies at Landmark theatres; some (like the Hillcrest Theatre here) have DVDs of movies from other production houses that they’ve shown.
Something tells me that 5-10 years from now, there will still be a lot of people who can’t afford broadband connections fast enough to support streaming movies, but can afford an online video rental service. Not to mention the massive bandwidth it’ll take for a company with a user base as large as Blockbuster’s to stream out all those movies at one time. Millions of dollars in hardware upgrades and Internet security expenses, at least, all of which will have to get passed on to the customer if they hope to survive for more than a couple of years afterwards. That ruins Blockbuster’s pricing advantage–unless they covered it by closing down stores, which would ruin the convenience advantage of video delivery and walk-in rentals.
Whoa…didn’t think this’d get this many responses this fast. Thanks, all…seeing all these perspectives has been a real eye-opener. (And that’s the whole point of this website, right? 
)
Just to clarify, I honestly suspected that the main problem was overexpansion (kinda like McDonalds reportedly had several years ago). Every location I remember did at least okay business, and there certainly wasn’t much competition I could see after the first year.
I never really wrapped my head around the idea of commercial Internet cinema until very recently (mainly due to my own hit-and-mostly-miss experiences with Internet pay per view), and I’m surprised as anyone that elminiating late fees backfired (if anything, I expected a small windfall due to clueless customers holding on just a bit too long).
Dang. Yes, I know, Americans are supposed to look at everything in cold-blooded monetary terms and respect the politics behind every decision…but dammit, I liked having that big 'ol store that had everything from offbeat anime to UFC classics. And taking my time looking over the tremendous selection, finding titles I’d never even heard of before, poring over row after row, all in a bright, clean air-conditioned building was always an enjoyable experience. Making the trip was no trouble at all, and the removal of late fees made returns a breeze.
I think what’s most stunning is how quickly things have changed. This was a national giant, easily on par with Burger King or even Wal-Mart. It hasn’t even been 20 years since it reached Hawaii’s shores. And now (with nearly all the local competition long dead), I’m facing the prospect of someday having no place at all to walk in and rent a movie, one that I might have a hard time finding on a website or unwilling to pay full price for. That’s more than a bit unnerving.