Blockbuster is emerging as the hottest ticket in video


It's a safe bet that anyone who rents videotapes has heard the name Blockbuster Video. It's a name most smaller store operators wish they didn't have to hear. In a year when many video dealers have complained about stagnating business, Blockbuster is racing ahead as if the video revolution never peaked.

In 1990, the chain almost doubled the number of its stores, from 862 to 1,545. In total revenues, it shot to $1.25 billion, up by a breathtaking 88 percent from 1989's $664 million. The company, based in Fort Lauderdale, Fla., can boast that one out of every five video-store rentals in this country takes place at a Blockbuster store.

Blockbuster began building video stores in Baltimore in 1988, under the franchises of two different groups, Cox Home Video and United Cable. At present, the two companies own 22 Blockbuster stores, with more scheduled to be built this year.

(Wally Kinef, spokesman for Blockbuster's corporate headdquarters in Fort Lauderdale, says that the FCC prohibits disclosure of the exact number of stores to be built as well as the volume of business Blockbustder does. However, he says Baltimore is a moderate market, with a number of stores comparable to St. Louis, Mo.)

Indications of the chain's dominance as well as other interesting facts about the state of video stores are contained in the latest ranking of the Top 100, compiled annually by Video Store magazine, a business publication for store owners.

According to the magazine, consumers will spend $9.44 billion on pre-recorded video in 1990. Just four years ago, they spent $4.11 billion. It's that kind of appetite that has made it possible for Blockbuster to grow, during the same time period, to its present formidable size from a mere ll stores.

Other chains have enjoyed rapid growth as well. Philadelphia's West Coast Video occupies the No. 2 spot on the Top 100 for the second year in a row, with 610 stores. Its biggest spujrt occurred in 1988, when it acquired the National Video franchise chain and for a time became the industry's biggest retailer, at least in store count.

Erol's, the 209-store chain basedin Springfield, Va., was also a former No. 1, back in 1987. In the latest ranking it clings to the No. 3 position even though it has the distinction of being the only chain in the top 10 to report a revenue decline. Erol's take slipped to $133 million from $138 million a year ago.

Although Erol's dominated its home turf of Washington-Baltimore for years, the privataely owned compnay was not quick to expand. Blockbuster, on the other hand, wooed Wall Street investors with its aggressive growth plans and embarked on a program of building stores and acquiring competitors.

Just last month it capped off the year by agreeing to purchase Erol's for $40 million. When the deal goes through as expected early this year, Blockbuster will be that much larger and Tower Video will by default move uo one slot from No. 4.

Tower is something of a special case in the Top 100. It's the only music-and-video chain that derives at least 30 percent of its business from video software sales and rentals. (Thirty percent is the magazine's cutoff point for being condisered at video specialist.) Competitors such as Sam Goody and Camelot have hundreds of stores, many more than Tower's 60, but video is not as big a part of their revenues.

Furthermore, though almost all speciality stores depend on video rentals for the bulk of their business, Tower has staked out different territory: sales of cassettes account for 59 percent of its video revenue. Some Tower video departments don't even offer rental.

It's worth noting that as such, Tower is at the forefront of a significant shift in the video business. In the last few years, the studios have learned that certain movies will sell so well if priced below $25 that they can practically ignore the rental market. The best example of that fact this Christmas was Touchstone Home Video's heavy TV advertising compaign for "Pretty Woman," calling it the perfect gift at $19.99.

Campaigns such as this have been so successful that, according to industry estimates, 1990 will represent the first year when sales to the consumer earned more for the studios (about $1.95 billion) than sales to the rental dealer (about $1.9 billion).

That actual sales of video now rival the rental segment in dollar value is a fundamental change in a business that's still quite young. It's also one area off video retaining that Blockbuster has yet to dominate--rentals account for 88 percent of its revenue.

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