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Chain movie-rental stores fading out in Valley

Chain movie rental stores run by Blockbuster and Hollywood Video are quietly closing up shop across the Valley.

They’ve left some communities, like Sanger and Dinuba, altogether.

The companies are struggling financially — losing ground to Netflix, Redbox and other companies that rent movies by mail, from automated kiosks or over the Web. Experts say it’s all part of the rapid evolution of the entertainment business.

Both companies are striving to stay relevant, however, with Blockbuster rolling out rental kiosks and emphasizing its own DVD-by-mail service.

Hollywood Video, meanwhile, is betting that customers will continue to want physical stores, and is bumping up its selection of movies and video games.

Chain movie rental shops have shut down at least a dozen locations in the Fresno area in recent months. More may be on the block, though neither company has announced detailed plans or locations. Blockbuster, which now has about 18 outlets remaining in Fresno County, expects to close up to 960 of its 7,100 stores worldwide by the end of 2010. The Dallas-based company had a $36.9 million loss in its second quarter.

Movie Gallery, which bought the owner of Hollywood Video in 2005, struggled with its debt and filed for bankruptcy last year. It emerged this year and is closing more than 1,000 of its 3,400 video stores in the U.S. and Canada. The company, with six outlets in Fresno County, also owns Game Crazy stores.

Locally, the closures have come without warning. Dinuba’s Blockbuster, which was the town’s only chain brick-and-mortar movie rental store, closed about two months ago. Independently owned Mega Video remains.

Sanger has lost both its Blockbuster and Hollywood Video outlets in recent weeks.

“Hollywood Video, they just picked up and moved in the middle of the night,” said Nettie Inouye, president and CEO of the Sanger Chamber of Commerce. “We weren’t aware they were considering moving out of Sanger.”

Both companies suggest in financial reports that closures are aimed at underperforming or unprofitable stores.

Over the years, new competitors have eaten away at Blockbuster and Hollywood Video’s business.

In 2004, chain rental stores owned 92% of the video-rental market, according to the Entertainment Merchants Association, which gets its information from Adams Media Research. Last year, that share had shrunk to 67%.

DVD-by-mail service Netflix and similar subscription services, meanwhile, more than tripled their share of the market over the last four years, to 27%. Netflix is also aggressively adding titles that can be streamed over the Web to computer or television screens.

A newer competitor is Redbox, owned by Coinstar Inc. The company has installed automated movie rental kiosks in supermarkets around the country. The kiosks charge $1 for one-night rentals that can be returned to any Redbox kiosk.

Kiosks — which had no presence in the video-rental market four years ago — had grown to 6% of it by 2008.

Further competition to the video-rental business comes from a new generation of digital video recorders that tempt consumers to stay in and watch recorded TV shows rather than movies, said Sean Bersell, vice president of public affairs for the Encino-based Entertainment Merchants Association.

Low-cost DVDs sold at retailers also compete with stores, though that pressure has waned some recently, he said.

The arrival of On Demand and other ways of ordering movies through the television and Internet aren’t yet having a big effect on rentals, though they may soon, he said.

In Sanger and Dinuba, competitors are taking advantage of the departure of Hollywood Video and Blockbuster. But it isn’t quite the same, said Inouye of the Sanger chamber.

Sanger has two Redbox kiosks, in the Save Mart and Walmart. But “even though Redbox is cheap, the variety of movies is very limited,” she said. “It’s sad to see [the stores] leave.”

In Dinuba, Redbox may be part of the reason Blockbuster left. The Walmart superstore has two Redbox kiosks.

“You go into Walmart on a Thursday or Friday night and people are lined up behind that Redbox,” said Dinuba Deputy City Manager Dan Meinert.Blockbuster says it’s not abandoning its customers.

The Dallas-based company has its own DVD-by-mail and download programs to compete with Netflix.

The company is also rolling out kiosks similar to those owned by Redbox. So far, they are in 500 locations in Publix supermarkets in the southeast and Big Y supermarkets in the northeast. Another 9,500 of them will be in stores across the country by the middle of next year, said spokesman Randy Hargrove.

Customers also soon will be able to download movies through their TiVo digital-video recorder and some Samsung HDTVs and Blu-ray players, he said. Samsung TVs will have a button on their remote allowing customers to order movies for between $1.99 and $3.99 per movie.

The company is also testing sending movies through cable providers in Charleston, W.Va., and Des Moines, Iowa.

Hargrove said Blockbuster has not forgotten about communities it has left.

“We have said for quite some time there’s going to be consolidation of our store portfolio,” he said. “The number of stores may be fewer, but you’re going to have far more points of distribution to get Blockbuster products.”

Hollywood Video did not return calls seeking comment. According to public documents, the company believes brick-and-mortar stores will continue to have relevance in coming years.

The company also plans to improve business by increasing the number of Blu-ray discs, video game consoles and video games available to rent. It does not plan to move into kiosks or TV technologies.

Bee staff writer Tim Sheehan contributed to this report. The reporter can be reached at bclough@fresnobee.com or (559) 441-6431.

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