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Posted 04.04.07 Internet Kills the Video Store: The Sequel Netflix's streaming movies may spell the end for local video stores. By Freda Moon April 5, 2007 Best Video in Hamden is a beloved community institution, and has survived the rise of chain video stores and Netflix by doing what it does better than anybody else: pedaling a vast, eclectic selection and employing an expert staff of film junkies. But with the advent of Netflix's new streaming video service, "Watch Now"-and the many similar sites sure to follow (Blockbuster says they'll have one within a year)-the end may be in sight for Best, and the few other local video stores still clinging to life. For the second time in its brief history, Netflix is once again re-shaping the way millions of Americans experience the movies. But while loving the convenience of a new, "on demand" universe, New Haveners may end up lamenting what is lost. Before his death in 2003, Neil Postman-the great communications theorist-warned often of the danger of new technologies. In Technopoly , his book of essays from 1992, he wrote, "Anyone who has studied the history of technology knows that technological change is always a Faustian bargain: Technology giveth and technology taketh away, and not always in equal measure." Postman was no Luddite, but he saw the dangers of "advances" more clearly than most. He wasn't easily seduced by them, or blinded by their promise. He saw them-and their effects on culture-for what they inevitably are: complicated, unpredictable and mostly out of our control. "A new technology," Postman argued, "sometimes creates more than it destroys. Sometimes, it destroys more than it creates." It's too early to know whether the creation of an easy, fast and well-designed online film service will prove to be a net gain or a net loss, as these things go. For those who love not only film, but the culture of film, it is likely to be both. Netflix, after all, has not been a friend to cinemaphiles. Yes, Netflix has a bigger, badder selection than Blockbuster, Hollywood and the rest of the chain video gang. And, yes, their prices are lower than the little-guy video store down the street. But who wants to wait days to watch the movie you're craving tonight ? An impressive selection and buffet-style pricing only goes so far, after all, when you're jonesing for something-perhaps a little John Hughes, or John Waters, or Johnny Depp?-right now. With "Watch Now," Netflix has done what nobody else, up until now, has been able to do. They've created an even more efficient way to get movies into people's homes. And in doing so, they've beaten their many would-be competitors to the punch. In 1997, when Netflix was founded, the company saw the promise of an infant technology, the digital video disc. It's easy to forget that it was only a decade ago that the DVD made its way from Japan to the United States, sparking a series of copyright battles and-in the relative blink of an eye-replacing the video cassette. It happened so fast that our language hasn't caught up. Many of us still refer to movie rental shops as "video stores"- even though video cassettes have all-but disappeared from their shelves. (Best Video, for example, has gradually been selling off its VHS collection, and is now down to just 3,000 to 4,000 tapes, of its more than 40,000 titles.) Netflix's snazzy red-and-white envelopes allowed the company to exploit the DVD's compact, mail-able format with a flat-rate, rental-by-mail business model. Today, Netflix has over 75,000 titles, 6.3 million subscribers and ships almost 1.6 million DVDs a day on average, according to the company's website. Last year, their membership grew by 51 percent and on Feb. 25, they delivered their one billionth DVD. It's one of the most jaw-dropping successes of the late '90s tech boom. But Netflix didn't just make its founders very, very wealthy-it also made its subscribers think about movies differently. For good or ill, adding movies to a Netflix "queue" is not the same as wandering the isles of a video store, looking for the movie that you'll watch when you get home. "What you can't do with Netflix," says Hank Paper, the owner of Best Video, "is that you can't play your spontaneity. What you do when you go to a video store is you go and you play your mood. With Netflix you can't do that, you create this list and what you get when they arrive in the mail may not be what you are in the mood for...That's where we still have an advantage." But now Netflixers can play their spontaneity. Included in the cost of their "Watch Now" plan, they can now stream a set number of video hours each month for free. If you've got the $18 plan, you get 18 hours of downloaded movies on top of your three DVDs at a time. Unlike previous attempts at streaming video, which were often slow or had poor image quality, "Watch Now" works well. Its site design is straight-forward, quick and requires no special software (it uses Windows Media Player). Even on my rickety "old" 2002 Dell, it took a minute and a half to begin watching. As Postman would be first to admit, there's no easy arithmetic for weighing the pluses and minuses of a new technology. Netflix is no exception. Movies-by-mail made a far wider selection of films available to people who might otherwise go without. Rural people, workaholics and new parents-along with others who don't have a good rental shop nearby, or don't have time to bother with one-suddenly had a massive movie warehouse at their disposal. Better still, a Netflix library pass came with an easy-on-the-pocketbook price tag, no late fees and relatively quick, to-your-door delivery. In this way, Netflix soon became the Starbucks of video stores, wiping out everything in its path. Neighborhood movie rental shops, especially the "independents," struggled against the business model that the new DVD technology allowed. Netflix is easier, cheaper and better stocked than the store down the street. This isn't the failure of the neighborhood shop but the strength of the Internet: impossibly low overhead. Best Video opened in 1985, in the "glory years of video rentals," says Best's manager, Richard Brown. "Home movie watching was novel at that time." Over the years, the store grew by charging a $14.95 lifetime membership fee, which is about the cost of adding one new movie to their collection. In 2002, says Brown, the store's rentals peaked. Since then, they've seen a gradual decline. In response, Best has put more emphasis on DVD sales, and has so far stayed viable. Their bottom line was the same over the last two years, according to Brown. But Brown sees that the end may be in sight, even for Best. The store has managed to compete on merit. But as Netflix and other sites begin to have a larger selection available online, neighborhood shops stand less and less of a chance. "When it becomes clear that there are 20, 30, 40 thousand titles to choose from in a streaming way, that's going to jeopardize even us," says Brown. "That's a very tough hurdle." Fortunately for Best, and those who love it, Netflix is not likely to have tens of thousands of titles online anytime soon. The movie studios make money on DVD sales and the broadcasting rights that television networks pay to show their films. "You won't find anyone with a significant number of titles, because it's the studios locking up titles," says Steve Swaysey, Netflix's spokesman. Right now, Netflix has 1,000 movies available online and they expect to have 5,000 by the end of the year. But until the studios make electronic licensing rights available for a wider variety of titles, most movies will still only be available on DVD. Swaysey points out that the online video universe is parallel to the "brick and mortar," post-theatrical movie universe. "There are three ways that you can get movies," says Swaysey. "You can watch them on TV, or go to the video store and rent them, or you can go to Wal-Mart or Best Buy and buy them." Online, he says, it works in the same way-except online, Netflix is the one video store that serves the entire country. "Only Netflix has streaming video for rental. Apple, Amazon and Wal-Mart are download-to-purchase and then Yahoo! and Google and YouTube are advertising supported." Swaysey's not entirely right. Cinemanow.com offers streaming movie rentals and Movielink.com, which is owned by the major movie studios and has been around since 2002, offers downloads that you can begin watching almost immediately with special software-both for about the cost of an in-store rental. There are other ways that tech and media companies are working to take advantage of the growing demand for "on demand." Apple is now selling a $300 gadget, Apple TV, that makes it possible to wirelessly beam anything from iTunes onto your TV screen. Movielink has a DIY version of the same idea: the site has directions on how to connect your laptop to your TV using cables available at most electronic stores. And IBM just announced that it's developed an optical chipset that reduces the time it takes to download a typical high-definition, feature-length movie from 30 seconds to one second-essentially making "instant download" a reality. As these technologies are perfected, it's likely that the Internet will become where most people go for movies. The cost of an Internet connection is still more than many families can afford, but more and more people get Internet access in their homes each year, and an ever-larger percentage are connecting using a high-speed, broadband connection. Fifty eight percent of U.S. households have an Internet connection and 62 percent of those use broadband, according to Centris data. The Entertainment Merchants Association, the membership trade group that represents video stores as well as subscription services, like Netflix, doesn't know whether there has been a decrease in the number of video rental stores nationwide. "We have not heard a big cry of a lot of people going out of business among our members," says Carrie Dieterich, vice president of Marketing and Industry Relations. "We don't know if all of this is necessarily going to replace traditional movie rental and buying," says Dieterich of the threat of new, streaming movie services, "or if it'll just mean that people are watching more...Are people just going to consume more entertainment or is one just going to cannibalize the other?" Dieterich doesn't think video stores are going away. "No matter how great technology gets," she says, "there's still going to be the desire to browse, to touch products physically, to talk to somebody. I think that there's always going to be that desire." Local video store owners are hoping Dieterich is right. Hector Rodriguez "got the bright idea" to buy a video store after surviving the 9-11 terrorist attack on the World Trade Center. He worked for 29 years at Morgan Stanley in New York and now owns Video Hut in Milford. "I think we're holding our own," says Rodriguez. "But it makes it difficult, you know, especially with the Internet and the kiosks-the red boxes at the supermarket where you can get a video for a buck-it's a two-prong attack, a three-prong attack, when you take into account Blockbuster. They want to be King Video." Rodriguez believes his store can survive long enough to adapt to the new technology. Like Dieterich, Rodriguez thinks he'll do it by appealing to people's desire to touch, to talk, to interact with their community. "We know about movies," says Rodriguez, "Sometimes [customers] come in and say, 'suggest a movie for me.' They like to come in and hold the box, browse-they say it's hard to do that on Netflix." People have invested a lot of money, he says, in home theaters-$2,000, high-definition, flat screen TVs and the like-and most are not willing to switch to watching movies on their computer screens. Hank Paper of Best Video also made this point (neither man, apparantly, has heard of Apple TV). "Families don't gather around and watch a movie on their computer screens," says Paper. But families might not be coming into the video store much any more either. Elliot Shushan owned Video Plaza in Milford for 18 years and a second store in Monroe for 12. The Milford shop went out of business four years ago and, when I reached him at his Monroe store, he was there cleaning it up and selling off the last of his inventory to whoever will take it. "We used to have whole families come in," says Shushan, "a couple movies for them, a couple movies for the kids." Over the last two to three years business has slowed "for like six different reasons," he says. People are downloading movies, they're using Netflix, they're watching cable and they're buying DVDs instead of renting. The pie became too thinly sliced for Video Plaza to sustain a 4,300 square-foot store. Now, the only rental shop in Monroe is Blockbuster. "In the next couple years," says Shushan, "I think they're gonna be out of business." The World Wide Web may cost us more than we realize. The Internet makes it possible for someone selling used books out of a warehouse in God-knows-where to compete-with almost no overhead-against your favorite, musty, used bookstore on the corner. But it's a game that the corner shop has little hope of winning. Suddenly, we're losing those small, corner shops. Of all sorts. In their place, we've got computers and a handful of too-tough-to-die chain stores. This is the promise and the danger-the Faustian bargain-of online shopping in general and of Netflix in particular. Like Wal-Mart and Starbucks, Netflix is appealing in its efficiencies. And, like them, the cost of Netflix is not only economic, but cultural, intellectual and personal. Even Swaysey, whose job it is to speak to the greatness of Netflix, acknowledges that it's putting video stores out of business and that that's not an entirely good thing. "There's something about downtown America that is charming," he says, "that you walk into a store and they know you. We've kind of lost that as a society." Tommy Kelleher, of Tommy K's-the small, regional chain of video stores-says that Netflix hasn't had a big impact on his business. "The people that would use Netflix," he says, "would tend to be people that didn't have stores that offered choice and we've been known for offering choice. We get art house, independent, gay/lesbian, international, adult-which Netflix doesn't do. They do what props their stock price up, so they censor." Even so, Tommy K's business has decreased 15 to 20 percent in the last few years, according to Kelleher. Of the 18 stores he had at the chain's peak, 10 now remain. It's not one factor, he says, but several: a "few percent from Netflix, a few percent from buying DVDs, a tiny bit from downloading." "It's going to be evolutionary, as opposed to revolutionary," says Kelleher. "It's more of a dimmer switch, rather than an on/off switch. The way I say it is, 'once you're born, you're starting to die.'" Both Brown and Kelleher say that their video shops have benefited by being in New Haven, a community that values independent stores and appreciates a broader, more eclectic selection of films. "We're lucky in New Haven," says Kelleher, "because we have independent stores of all types. Blockbuster doesn't get the real movies. They get the sanitized airline versions. They cut the edges off bell shaped curve, and then they do it next year, and next year ... pretty soon we're all watching Lassie." None of these local video store owners, though, seems confident that the stores will be able to survive indefinitely. "We can't compete with, even, Stop & Shop," says Brown "if they have [the new Martin Scorsese movie, The Departed ] in their store at cost or below cost. That's just not what a small business can do." The competition is coming from all sides. Indeed it is. Millions of people have been seduced by Netflix's at-home-on-your-ass convenience. "Watch Now" takes it a step further. Now, we don't even have to leave bed. "We live in a society now that you don't even have to go out of your house, you can get everything delivered," says Best Video's Richard Brown. "I lament that, not only as a manager of a small business, but as a human being. I think people like to go out of their house; they like to handle things, to collect things. We really are neighborhood oriented. We want people to leave their house and come down to the shop." ● fmoon@newhavenadvocate.com |
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