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Movie Gallery to close in company-wide restructure
Published 3/20/2010 in Business
By DEREK THOMPSON
Movie Gallery, 503 E. Kansas Ave., is currently liquidating its stock of movies and fixtures in preparation for the closing of its doors April 1.
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Daniel Sato/Telegram Yerania Mora reads the back cover of ÒCleanerÓ while browsing DVDs Wednesday at Movie Gallery.
Following a Feb. 3 declaration of Chapter 11 bankruptcy, the country's second largest movie rental chain is restructuring, closing 760 U.S. stores. After the initial wave of closings, the corporation will operate 1,906 rental stores.
According to a statement, the company is closing stores because they aren't "profitable and because funds from liquidating them can help us moving forward."
Chris Willard, manager of the Garden City rental store, says the decision to close his location was a close one.
"It surprised a lot of people," Willard said.
The location was too high-risk, the manager said. Under Chapter 11 bankruptcy, the company has one chance to break a property lease.
"They have one opportunity to close risky stores, and rather than signing another five year lease ... they went ahead and decided to close it."
In an effort to liquidate the inventory of movies, prices have been marked down and are expected to continue to drop as April 1 approaches, Willard said.
"It's just too hard of times. Too hard and that it was just too much risk," the manager said.
With the closing of Movie Gallery, Hastings is now the sole video rental store in Garden City, which has benefitted the business.
"(Rentals are) great, and with the closing of Movie Gallery it's helped our business," Stefani Sebranek, Hastings store manager, said.
Rental options like Netflix and Redbox have put pressure on brick-and-mortar stores in recent years.
Subscription-based Netflix was introduced in 1999 and currently has more than 12 million subscribers, but the service may not have as drastic an effect on retail locations as Redbox kiosks, according to Steve Swasey, vice president of corporate communications for Netflix.
"The pressure on the stores is probably coming more from Redbox because that's a transactional experience and it's a destination," Swasey said. "So it's very similar to going to a video store, but it's a whole lot easier and less expensive," Swasey said. "We know Netflix is going to continue growing, and Redbox is not impeding the growth of Netflix. Redbox is growing, so they're getting their market from somewhere, and we think that's video stores."
Eventually, movie distribution will go online, Swasey predicts. Netflix currently offers movies by mail and select content via online streaming.
"Ultimately, it'll all be streaming, but not for many years. We'll still be delivering DVDs for the next 20 years," Swasey said.
While new distribution methods have hurt movie rental chains, there may still be hope for retail locations.
On Jan. 6, Warner Bros. Home Entertainment and Netflix announced a distribution agreement giving retail locations a 28-day window to rent movies before they're available through Netflix. Redbox recently followed suit, reaching a similar distribution agreement with Warner Bros.
"It's a win-win for everybody," Swasey said. "We were able to lower costs. We were never able to buy all the count of DVDs we needed to fulfill the demand at the price we were paying for the first day. By agreeing to a 28-day window, we were able to buy enough DVDs for everyone who wants it, and we were able to use the savings to put more into streaming Warner Bros. content."
Being able to interact with an associate and get recommendations is the advantage retail locations have over other options, Willard said.
"That's the beauty of movie stores, they usually have managers that are movie buffs," Willard said. "There's going to be a lot of people that are sad to see (Movie Gallery) go."
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