Home Video Firms Grow, But Slower
DAN Jury loves watching movies. Perhaps that's why he started a business that is now renting out films to 12,000 subscribers in the United States and abroad. Mr. Jury is president of Home Film Festival, a privately held company in Scranton, Pa., which rents movies through the mail. When HFF started up in late 1984, the company had a catalog of 50 titles. Today, HFF rents out over 1,400 titles, leaning towards art-house classics and foreign films by such directors as Kurosawa, Truffaut, Fellini, Bergman, and Fassbinder.
One subscriber has rentals delivered by burro to a dude ranch at the bottom of the Grand Canyon. Another film buff, in St. Petersburg, Fla., has rented ``just about every title we have,'' laughs Jury, also a documentary filmmaker. HFF's revenue will grow about 20 percent this year, he says.
``Just going to a movie in New York can easily cost a family of four $40,'' says Jury. ``Compare that to the price of a rental'' and a person can understand why the rental business is flourishing.
The success of Home Film Festival is only one indication of the phenomenal growth of the home video industry. According to officials of Paramount Communications Inc., a major maker of video releases, 70 percent of all households in the US now have a videocassette recorder. One quarter have two or more VCRs. Indeed, most film companies consider video rentals and video sales a major chunk of the earnings on their films - sometimes spelling the difference between a loss or a profit. Companies like Paramoun t are now pushing video rentals and sales abroad. Paramount says that during 1990 overseas sales of video products approached parity with US sales.
Some movies actually do better on video than in theaters, industry experts note. Current top rentals, according to Variety, an entertainment weekly, include ``Flatliners,'' ``Die Hard 2,'' ``Days of Thunder,'' ``Navy Seals,'' and ``Darkman.''
Still, popular as rentals are, the industry is undergoing rapid change. Consolidations are common among major rental chains. Blockbuster Entertainment, the largest of the publicly owned companies, is in the process of acquiring the second largest chain, Erol's, based in Washington. And, not surprisingly, overall industry growth has slowed somewhat from the pell-mell rates of the 1970s, when families were first acquiring VCRs. Many mom and pop rental stores have gone out of business, and more are expecte d to go under, as local and national chains - such as Palmer Video (on the East Coast), or Blockbuster, West Coast Video, and RKO-Warner - expand into new markets. But successful independent stores continue to post growth by adding classic or hard-to-find films, and providing computer terminals to help consumers locate titles. Many stores even sell popcorn.
The video rental industry will probably grow between 7 and 10 percent this year, says Gary Jacobson, an analyst with Kidder, Peabody & Co. Total revenues will reach $11 billion, up from $10 billion in 1990. ``Sell-throughs,'' that is, outright sales of films, a process which has been particularly successful for Disney, will be up; but rentals will continue to be the most important part of the industry, Mr. Jacobson says.
Blockbuster dominates the rental business, with 1,650 stores. Jacobson expects the company, listed on the New York Stock Exchange, will post earnings growth of about 50 percent this year. Blockbuster officials expect to have 3,000 stores open by the mid-1990s, with a solid 20 percent market share. The company is also expanding international operations, with stores in Canada, Japan, and Europe.
Jacobson likes Blockbuster, based on the company's revenue and earnings growth, sector domination, and attractive valuation levels.
The video business has proven to be a plus not only for the studios, but book publishers. Blockbuster's book ``The Greatest Movies of All Times'' ($3.95), for example, was a sell-out last year - over 600,000 copies. Paperback guides to rental movies are also big sellers.