How to Create the Perfect Video Store

The death knell for the brick-and-mortar video store has been sounded too soon. Sure, Movie Gallery, the country’s second-largest movie rental chain, has filed for bankruptcy, and independent video stores are closing as they fight off online rental competition from the likes of Netflix (NFLX), which had a rockin’ third quarter. But we’re on the cusp of coming full circle, and there is an opportunity in the future world of movie rentals for the little video guy to thrive.

Renting movies is still a favorite pastime for Americans. According to the Entertainment Merchants Association, 88 million households have DVD players, and home video rentals generated $8.5 billion in revenue in 2006.

Right now, there are three main options for renting a movie: Go to your video store, use a rent-by-mail service (like Netflix), or use video on demand through your cable box or an up-and-coming service like Amazon’s Unbox.

Separately, none of these are the best solution, but combine the best of all three and you’ve got movie magic.

Local Video Store
PRO: Convenience, nearly instant gratification, socialization
CON: Typically can’t house a vast library of content

Rent by Mail
PRO: Huge libraries of content, no late fees
CON: Have to wait for movie, not-so-perfect recommendations

VOD
PRO: Instant gratification
CONS: Not as many titles to choose from, limited or no recommendations

Here’s how you do it:

First, get a small physical space. You only need a counter and a few computers. Next, instead of aisles of films, there will just be a “genius bar”-like setup. At this bar will be four or five movie fanatics who will talk with you for a few minutes and then make a movie recommendation. When you decide on a film, you push a button on a computer and the film is immediately sent to your home PC or set-top box, waiting for you when you get home.

Here’s why it will work:

The space is small, so it’ll be cheap and that’s always good. And you’ll make money through affiliate relationships with whichever content libraries dominate the movie world of the future. Those affiliate fees will be a fraction of what’s being earned through rentals right now. You can also make money by charging a membership fee. If the recommendations from the geniuses are good, people will pay (it’s cheaper than renting a bunch of crummy movies). The personal touch, in fact, is the cornerstone of this new approach.

As Liz pointed out earlier, video wants to be social. Not just the act of watching films with other people, but talking about films with other people. It’s this interaction that algorithmic recommendations lack. Mathematics can’t pick up on the subtleties of conversing with someone face-to-face. Sharing movie lists with friends in a social network is a step up, but it’s limited to the expertise — and taste — of your social circle.

In the meantime, small video stores are starting to fight back. Some are turning into rent and buy locations, selling previously-viewed DVDs for cheap. Others are turning into niche video outlets or adding additional in-store services.

But the beauty of this idea is that it’s technology-independent. No matter which format we use to watch films, we’ll always want to find the next great one — and we’ll always want to talk about it with someone.