What’s really killing the video store
As many as a quarter of SA’s video stores closed down last year, with some arguing that the distribution model is as much to blame as piracy. By Craig Wilson.
Media group Avusa said last week that 25% of SA video stores had shut up shop in the past year. Rather than the usual culprits of piracy, video on demand and the weak economy, one major industry player is laying the blame squarely at the door of Avusa-owned Nu Metro.
Peter Scott, a director at DVD rental chain Mr Video, says Nu Metro has “monopolised the rental industry by entering into exclusive agreements with the major studios, ensuring that the prices that video rental stores have to pay for movies … are not determined by any competition whatsoever”.
He says Nu Metro has a stranglehold over which content makes it to the SA rental market, in the process “denying the public from a huge number of other films available”.
But Fay Amaral, MD of entertainment at Avusa — she oversees Nu Metro Film Distribution, Nu Metro Cinemas and Nu Metro Home Entertainment — says there is a misconception that the company is the sole distributor of content to the rental market and that there are instances where the company only has the rights for DVD and Blu-ray resale and not rental, as is the case with movies from studio 20th Century Fox.
She says there are other players in the market and potentially room for more, but the barriers to entry are high, particularly because of the distribution challenges in SA, where cities and towns are far apart.
Though Nu Metro is by far the largest distributor to the rental market, other players include Ster-Kinekor, Next Entertainment and a handful of niche, independent distributors.
Amaral says that the decline in video-store numbers is due to a “mixed bag of driving factors” and cannot be attributed to piracy, video on demand or economic conditions alone.
She says services like pay-TV operator DStv’s BoxOffice, a video-on-demand service where users can rent movies via their decoders, is a factor, but its limited selection and availability (it’s only on DStv’s personal video recorders on its high-end subscription package) mean its impact isn’t big.
However, Amaral says BoxOffice is the “catalyst for a trend”. In keeping with international markets, video on demand will become more popular as Internet connection speeds in SA increase and bandwidth prices fall.
“There are also economic drivers to consider,” she says. “There are basic economic factors causing smaller operators to close, just as there are in other industries. The cost of running operations, from rent to electricity, is a definite contributing factor.”
Amaral says that despite the poor economy, spending on entertainment by consumers remains positive. “Renting videos is still a cheap form of entertainment from a family point of view,” she says, adding that stores with deeper back catalogues have a better chance of differentiating themselves and continuing to perform, at least for now.
DVD and Blu-ray sales, meanwhile, are up over the last year, though Amaral suggests this is also the result of price decreases. “As with electronics, over time the price of formats like DVD and Blu-ray inevitably come down. Again, this is in line with international trends.”
Cinema, meanwhile, continues to perform well, with 3D content helping to keep revenue up on account of higher ticket prices. “SA has had consistent [cinema] attendance for 15 years,” she says. “Spikes happen on account of content. There’s a very loyal movie-going audience in SA that gets rejuvenated through the youth and which crosses all demographics.”
In fact, in recessionary times, cinema attendance actually tends to go up, perhaps due to an increased demand for escapism.
Video rentals don’t seem to be enjoying the same stability seen by the sales and cinema markets. Scott says Mr Video has experienced “some strain”, though not to the extent of a quarter of its stores being closed down. He says he believes the majority of those that have closed are independently owned stores.
Scott won’t reveal store numbers or say how many applications Mr Video has received from prospective franchisees. Rival chain Video Spot, meanwhile, says two of its 14 stores have closed in the past 12 months. It suggests closures were kept to a minimum because of Video Spot’s extensive back catalogue.
Video on demand is having an impact, says Scott, mainly in affluent areas where consumers have DStv Premium subscriptions. However, he says DStv BoxOffice can’t compete with rental stores on price or range of content.
Piracy remains the primary reason video stores are closing down and government isn’t doing enough to stamp it out, despite making noises about wanting to stimulate the local film industry, Scott says. — (c) 2012 NewsCentral Media
- Image: Jepoirrier/Flickr