There's doom in the midst of the VCR boom. Many small video stores are struggling. Others--one out of four, according to industry estimates--are closing.
The market is certainly growing. The number of VCR households, now close to 28 million, will nearly double--to 50 million--in two years.
So why are stores failing? "The competition is rough and it's getting rougher," explained Bob Moffett, president of the nationwide Video Biz chain. "If you happen to have an area all to yourself, you're lucky. When you're the only game in town, you'll most likely be a success. But as the business grows, it's harder and harder to find a video store that doesn't have competition. In a competitive situation, you get things like price wars that wind up making stores lose money."
A struggling retailer in West Los Angeles, whose store has to compete with several others in the neighborhood, acknowledged that this competition is his primary headache. "It's killing me," griped the retailer, who insisted on anonymity. "I'm not sure how long I can afford to stay in business. I used to have this area to myself. Now other stores are taking business away."
Another problem is poor management, a subject that claimed a fair amount of attention at last summer's Video Software Dealers convention in Washington.
Meir Hed, who co-owns two prospering Videotheque stores in Beverly Hills and Westwood, said this week: "A lot of these stores that are closing were badly managed. So many people jumped into this business to make a quick killing. They never knew what they were doing. Even in a healthy marketplace like this, many of these store owners still don't know enough to be successful."
Video-store failures have been largely hidden because so many new stores have also been opening. At present, there are about 24,000 stores in the country, according to industry figures. Because of the incredible expansion of the market, various industry observers project that the total number will swell to about 30,000 in two years.
Moffett predicts that the rate of small-store closings will accelerate this summer: "December and January are big months so these small stores will be OK for a while. But next summer, when business is traditionally slow because people are on vacation, many, many of these stores will fail. It's going to be very noticeable. A lot of them just don't have the buying power, the resources, the advertsing budgets to last through another slow period." The big franchise chains, Moffett said, are the wave of the future. He compared the infant home video industry to the record business, which once consisted of many small labels but is now dominated by a few majors.
"Chains do volume buying and can afford the kind of advertising and publicity that the small stores can't," he said. "If a franchise moves into a neighborhood, it has the resources to offer more tapes and better selection of tapes. They'll take business from the smaller stores."
This chain domination, Moffett predicted, will be in effect in two years: "Now there are four big chains. In two years there will be about six majors. They'll control the market.'
KIDVID: This has been a big year for children's videocassettes and, predicts Richard Fried, director of marketing for Disney Home Video, next year should be even better.
Depending on which survey you read, kidvid, with more than 2,000 titles, accounts for 12%-20% of the home-video market. Fried isn't saying the market share will jump dramatically, but the entire market is expanding so rapidly (VCRs are selling at the rate of nearly 1 million a month) that same kidvid share will translate to many more customers next year.
"The new VCR owners are likely to have at least two kids," he explained. "The market isn't as upscale any more. There's more middle-class and lower-middle class families in it now--more families with children."
While not forecasting drastic changes in kidvid content, he suggested that "there will be more original programming, but no dramatic rise. There was increased activity in original programming this year and there will be more activity next year. Original programming is a small part of the whole but it's growing."
That's good news to parents who have been complaining--and rightfully so--that most kidvid isn't intelligent programming but primarily recycled animated TV shows and movies.
TOP CHILDREN'S VIDEOCASSETTES (compiled by Video Insider magazine)
2--"The Care Bears Movie" (Vestron).
3--"Rainbow Brite-Monstromurk Menace" (Children's Video Library).
4--"Robin Hood" (Disney).
6--"She-Ra, Princess of Power, Vol.1" (Magic Window).
7--"He-Man and She-Ra, Secret of the Sword" (Magic Window).
8--"Here Come the Littles: The Movie" (Playhouse Video).
9--"Road Runner vs. Wile E. Coyote" (Warner Video).
10--"Bugs Bunny's Wacky Adventures" (Warner Video).