The Store-Based Video Rental Business Fads Away

No. 2 Rental Chain Hollywood Video to Close (MSNBC)

Video Rental Stores DeclineThe Product Life Cycle has been a valuable planning tool for marketers for many years.  As we discuss in this tutorial, the PLC is useful because it suggests “that products go through several stages of ‘life’ with each stage presenting the marketer with different challenges that must be met with different marketing approaches.” For marketers, the key concept underlying the PLC is in understanding that marketing tactics must change as a product’s PLC position changes. But the PLC is not only applicable to specific products (e.g., a certain brand), it can also be used at a broader level to analyze entire markets, where changing conditions affect all firms offering products within a particular product category.

For example, consider what has happened to the retail video rental business.  Renting videos through retail stores started in the late 1970s and the early 1980s when movies were first introduced on video cassettes (i.e., Introduction Stage of PLC).  During the 1980s and the early 1990s entrepreneurs saw opportunities in this emerging market and launched retail outlets renting cassettes to a growing market of VCR owners.  Soon retail chains entered the picture and the video rental market took off (i.e., Growth Stage of PLC).  When growth slowed down in the mid-1990s (i.e., Maturity Stage of PLC) these stores got a sales boost with the introduction of DVD movies (i.e., Extending the PLC).

But the video rental market would see their market suffer in the early 2000s as new technologies emerged.  First, in-store movie rentals slowed because of competition that offered new distribution options, such as direct shippers (e.g., Netflix) and kiosk machines (e.g., Redbox), enabling customers to place orders and make payment over the Internet.  Next was the real market killer, the evolution of on-demand digital movies available through cable television services and Internet websites.  By 2005 these combined to drastically reduce demand for in-store video rental (i.e., Decline Stage of PLC).

As this story makes clear, things have now gotten even worse.  While Blockbuster and a few other retail stores still remain, it is highly unlikely the store-based video rental model will be around much longer, thus bringing to an end the PLC for this product category.

Movie Gallery Inc., the owner of struggling movie rental chain Hollywood Video, is planning to close its remaining stores and liquidate as consumers are increasingly getting movies through the mail, vending machines and high-speed Internet connections.

Where do Netflix and Redbox fit within the PLC?  Are they likely to soon face the same fate as store-based video retailers?

Image by Thomas Hawk

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