Video Evolution : Firm Combines Film Rentals, Automatic Tellers and Drive-Up Ease
Call it the logical next step in cultural evolution. Perhaps it was only a matter of time before some enterprising types combined those two ubiquitous features of modern life, the video rental store and the automated bank teller machine.
Harold Brown and Fred Di Giorgio have done just that. The two West Covina entrepreneurs unveiled the first Video-matic automated movie dispenser last week in a parking lot east of the Puente Hills Mall.
Brown and Di Giorgio, who have been in the video retailing business for about 10 years, hit upon the Video-matic idea last year while trying to identify the next big trend in the movie rental trade.
“It just came about as a natural next generation, you might say,” Di Giorgio said. Brown “was looking at automated equipment and I was exploring a drive-up kiosk similar to Fotomat. We decided, ‘Why not marry the best of both worlds?’ ”
Holds 500 Cassettes
The Video-matic prototype is a rectangular kiosk that takes up about three spaces in the average parking lot and holds 500 video cassettes locked in bulletproof plastic bins.
On each side of the kiosk is an ATM-like device through which a customer slides a credit card. The customer then punches in the number of the bin containing the desired movie and--once his or her credit is approved by a computer--the bin automatically opens.
“The entire transaction takes between 30 and 40 seconds,” Di Giorgio said.
To return movies, the process is reversed and the cost of the rentals is charged to the customer’s credit card account. The machine can also issue cards that enable renters to receive a volume discount, a feature the Video-matic’s creators hope will inspire customer loyalty.
Actually, automated video dispensers have existed for years in locations such as shopping malls, hotels and office buildings, while other companies have tried drive-through video stores with live sales clerks, said Judith Sawyer, editor of Video magazine.
But Video-matic is the first attempt to join automation with drive-up convenience, Sawyer said. This, combined with a larger inventory of the most popular movies, should make the kiosks a hit with consumers, she said.
‘A Drive-In Culture’
“We are kind of a drive-in culture,” Sawyer said by telephone from her New York office. “I would think that in a fast-paced area like L.A., it should be very popular, depending, of course, on whether there are any problems with the machines. . . . I think they should be able to give the video stores a run for their money.”
Brown and Di Giorgio said their creation is geared toward consumers who work too late to make it to the video store or who are too busy to wait in line at the rental counter. Films rent for $2.49 a day.
The Video-matic is stocked with several copies of the top 50 rental movies--as determined by trade publications--and new releases that have yet to make the charts. The average large video store stocks more than 2,000 titles.
“This gives the customers what they want--multiple copies of the top movies 24 hours a day,” Brown said.
Film buffs seeking movies of earlier vintage will either have to brave the inside of a video store or settle for “Casual Sex” instead of “Casablanca.” This is not a concern to the Video-matic’s creators, who said they are willing to forgo that segment of the market.
“About 80% of the revenue that comes into a video store is from new releases,” Brown said. “In a video store, you simply keep collecting old movies.”
Movies that are no longer “hot” enough to command space in the kiosks will be sold to wholesalers, which supply small, independent video stores that cannot afford an entire inventory of brand-new films. Ironically, these are the types of businesses that are most likely to be squeezed out of the market by the new technology, Di Giorgio said.
“We’ve studied our competition, and we feel that the super stores (large establishments with thousands of videos) have their niche and the music stores have their niche,” he said. “We feel the market we will impact the most will be the mom-and-pop independently owned video store.”
Frank Moldsted, editor of Video Store magazine, said statistics on file at his Santa Ana office show that new releases account for only 53% of the rental revenue in a typical retail store. He believes video vending machines will serve a certain group of movie renters, but will not greatly change the industry.
‘Nod to Convenience’
“It’s not going to drain the lifeblood out of the video store, but it’s one of a persistent series of cuts,” Moldsted said. “A good-sized video store with a large selection isn’t going to have much to worry about. One of the great attributes of going to a video store is browsing for the title you want. The vending machine is strictly a nod to convenience.”
Moldsted said the concept of video vending machines has been around for years, but the idea was not practical at first because there weren’t enough video cassette recorders in existence to create the necessary demand. With VCRs now in 60% of American homes, it is expected that by 1991, there will be 23,000 video vending machines nationwide, according to Video Store magazine.
The grand opening of the first Video-matic outlet in Industry last Friday drew about 100 people. However, most of them were not looking to rent movies, but rather were weighing whether to plunk down $150,000 for their own franchises.
Investors Check It Out
While many of the prospective franchisees wanted to mull the idea over a bit, a few, such as Max Hall of Orange, were ready to take the plunge.
“I think he’s got a gold mine here,” said Hall, who said he had been looking for a franchise business for some time and was attracted by the low maintenance required by an automated video outlet. “You don’t have employees, so you don’t have employee theft, which is a big part of the insurance (costs).”
Most people interested in buying franchises are not high rollers, Brown said, but wage earners who want to own their own business without giving up a steady paycheck.
Potential buyers peppered Brown with questions, mostly about the risk of theft and vandalism to the machines. A key point of concern was that customers might return empty cassette boxes instead of the movies they had rented.
“It’s a very smart machine,” Brown assured them, noting that the kiosk contains scanners--similar to those at grocery stores--which read bar code labels attached to the cassettes. “If you try to put in no tape or a blank tape or another movie, it’ll give you another chance. If you don’t return (the genuine cassette) in five days, it’ll bill you for it.”
Warning to Vandals
Although the kiosk contains no cash, it is equipped with a security system to discourage vandalism and theft. Anyone tampering with the kiosk is greeted by an Orwellian voice from an overhead speaker, warning the perpetrator that he has “violated a prohibited area” and that the police have been called.
The two men said they envision Video-matic kiosks dotting parking lots throughout California and, perhaps, nationwide. “We’re thinking we’re the Fotomat of the ‘90s,” Di Giorgio said.
Of course, if the idea catches on, imitation can’t be far behind. To prevent this, the two men have secured a trademark on the Video-matic name and an exclusive agreement with the manufacturer of the ATM-video hybrid machine, Video International Vending Associates Inc.
Although this by no means precludes another company from getting into the automated video kiosk business, Brown said he is not worried.
“There’s such a market out there,” he said. “It’s really not a problem.”
But the same market force that led to Video-matic’s creation--the public’s insatiable demand for the latest hit movies--may lead to the demise of video as a medium, according to Tim Baskerville, president of Vidmar Inc., a Hollywood-based home entertainment market analysis firm.
“The problem with a hit product is that when it comes, there is a short supply and a very large demand and that demand is short-lived,” Baskerville said. “For a few weeks, every copy of the movie is rented out every night. Then the demand drops off and the retailer is stuck with the cassettes.”
After peaking about 1991, videos will begin to be replaced as the top home entertainment medium by pay-per-view cable programming, Baskerville predicted, citing greater convenience for consumers.
“They don’t have to schlep to the store to rent or return a cassette,” he said. Pay-per-view “is small now because only a few homes have the technology to receive it, but it’s going to get bigger. . . . (Video) has certainly reached its peak in terms of growth rate and our view is that it may decrease in absolute terms as well. The bloom is definitely off the rose.”
