Store closures will ‘severely impact’ UK video rental market

The UK DVD and Blu-ray rental market will decline sharply this year following the shut-down of half the country’s Blockbuster video stores as part of a restructuring agreed by the company’s new management, according to research from IHS Screen Digest.

According to IHS Screen Digest, the UK market for physical video rental will drop by 22% in 2013 to £202 million (US$308 million), the sharpest predicted annual decrease for the entire period from 2007-17.

DVD rentals are expected to fall by 53.2% to 15.4 million this year, while Blu-ray rentals will fall by 61.3% to 2.8 million, according to the research group.

Furthermore, IHS predicts that the DVD and Blu-ray rental market will decline to £172.7 million by 2017.

Rental stores accounted for 41.3% of the overall video rental market in 2012, but is expected to take just 24.7% this year. In the longer term, IHS expects customers to turn to video platforms such as the online sector, which is is expected to grow to 75.3% this year, and other platforms including pay TV.

“The year 2013 is set to become a watershed for the UK video rental market as a result of the wholesale closure of Blockbuster UK stores,” said Tony Gunnarsson, senior video analyst at IHS. “The massive downturn in the store-based video rental market represents a significant loss to the video market and will result in a major decline and radical transformation of the UK video market overall. From 2013 on, the UK physical-video rental business increasingly will be dominated by online rent-by-mail subscription services.”

Blockbuster plans to reduce the number of its UK rental stores from 530 to 264 over the course of the year. The company’s administrators, Deloitte, announced two rounds of store closures earlier this year covering 224 sites. Supermarket chain Morrison’s subsequently acquired 49 stores while Gordon Brothers acquired a total of 264 sites.