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Memory Lane - Revolution for Rent

Sat, 04/30/2011 - 8:25pm
Stewart Schley, Media & Technology Writer, Denver, Colo.

Rented movies now tend to come to consumers through the mail, or via increasingly popular online streaming services.

George Atkinson was 28 years old when he took a flyer on an untested business. After leasing a 600-square-foot store on Wilshire Blvd. in Los Angeles, Atkinson bought 100 videotapes of pre-recorded movies from Magnetic Video’s Video Club of America, a first-of-its-kind mail-order entertainment distributor, and prepared, knowingly or not, to wreak havoc on the entertainment industry.

Stewart SchleyAtkinson, who had previously sold Super 8 movie projectors and films, wasn’t picky. He ordered two copies each of all 50 movies Magnetic Video sold. He displayed them on a rack in his retail store and offered to rent them to customers for $10 apiece. Buyers who paid a $50 (annual) or $100 (lifetime) membership fee could take them home, watch them and return them. The membership fees provided capital, allowing Atkinson to stock up on more titles and pay bills, like the one he owed the Los Angeles Times for a tiny, one-column advertisement.

It was a simple business plan, and it’s easy to imagine Atkinson, electronic calculator at hand, running the numbers. One hundred annual members would provide $5,000 in working capital he could use to supplement his selection. Assuming each member would rent a couple videos a month, Atkinson could conservatively count on $2,000 in monthly revenue. If more members signed on, if lifetime memberships proved popular and if customers developed a habit of renting more movies, the numbers would look even better.

The audacious part was the conceit itself – the idea of renting and re-renting recorded movies to multiple customers. Video Club of America, a pioneer in its own right, was set up by Magnetic Video founder Andre Blay exclusively to sell movie videotapes. There was no thought of renting them. In conceiving his business, Atkinson knew he would be testing the edges of copyright law and inviting intensive scrutiny from nearby Hollywood movie studios.

From a consumer-market standpoint, though, Atkinson’s idea was a smash hit. Customers swarmed to Atkinson’s store, The Video Station. The concept was so popular that Atkinson began franchising additional stores within a year, and copycat businesses sprang up everywhere as entrepreneurs staked out locations and ordered cartons of plastic videocassettes from distributors. VCR sales soared as consumers who had little taste for recording TV shows now found a worthy reason to buy one of the devices. By 1985, 21 percent of U.S. homes had one.

In renting movies on tape for viewing at home, Atkinson hadn’t just struck a chord with movie fans; he’d inspired a multi-billiondollar entertainment category. Ten years after Atkinson started renting movies, home video rental was a $5 billion business in the U.S., and it was rare to drive past a strip mall or retail center without seeing a video store, its windows festooned with colorful posters and come-ons for inexpensive rentals.

The repercussions of the burgeoning home video rental industry were felt throughout the entertainment industry.

In a 2011 interview for The Cable Center’s Oral History Project, the former president of HBO’s U.S. operations, John Billock, talked about how the home video movement unnerved HBO executives. “Ostensibly this was going to be the death of HBO, because now people could go to a store, pick out any movie they want, play it whenever they want, pause it, whatever.”

The popularity of home video would eventually convince HBO to invest significantly in original programming as a way to stand out. In a way, HBO’s iconic mobster figure, Tony Soprano, is a direct descendant of the VCR.

Last month’s salvaging of the remains of Blockbuster by Dish Network – the world’s largest video retailer in the end was worth just $320 million – indicates how much the industry invented by Atkinson, who died in 2005, has changed. Passersby are more likely to find a pizza parlor than a video store at the local strip mall, and rented movies now tend to come to consumers through the mail, or via increasingly popular online streaming services.

Is the door closing, then, after a 30-year run? Hardly. Although movie rental is very much in transition, it remains a huge contributor. The Hollywood-backed Digital Entertainment Group says U.S. physical media film and TV revenue amounted to $16.3 billion last year, surpassing movie theater receipts. The physical media category isn’t growing anymore, but a newer breed of rental platforms, including cable VOD and online stores, is. As often happens in media, the original concept remains very much alive. It’s the instruments of delivery that change.

E-Mail: stewart@stewartschley.com

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