End of an era?
Video Update latest rental store to close in Eagan
In 1992, “The Bodyguard” was among the top-grossing movies and Video Update opened its first Eagan store. Much has changed since then, including the demand for video rental stores. And after 20 years in business, Video Update at 1095 Diffley Road closed its doors.
“Eagan’s been a great place to do business,” co-owner Dave Lozinski said. “I’m going to miss a lot of customers, which have turned into friends over the years.”
Lozinski’s lease on the 4,800-square-foot store ended this year, and he decided to close due to the struggling industry and rising costs.
“The industry is falling and it’s becoming harder to keep going,” Lozinski said.
Lozinski and his brother Jim hoped to keep the store open until early September but decided to close sooner due to a number of factors.
When the brothers opened the store two decades ago, the video rental industry was booming and they felt it was a prime opportunity to be their own boss.
“We always wanted to do a family business and video stores were doing so well in the ’90s,” Lozinski said.
But now, Video Update and other rental stores face growing competition from Netflix, Redbox, streaming and video on-demand services provided by cable companies.
“Technology is working against (video rental stores),” said Mark Spriggs, director of the Schulze School of Entrepreneurship at the University of St. Thomas.
Spriggs predicts that within the next five to 10 years, video rental stores will be limited to specialty establishments and small towns.
The industry has taken a hard hit as more people opt for alternatives to their local video store. Revenues nationwide fell on average, 6.6 percent between 2002 and 2012 to $5.9 billion, according to a report by IBISWorld, an national business analyst group.
The industry’s revenue is expected to decline 13.8 percent per year over the next five years, according to the report.
“The economics don’t work for video stores anymore, because it costs so much more for a building, than say a Red Box,” Spriggs said.
Video Update’s parent company was among the first to feel the squeeze and filed for bankruptcy in 2000. Despite the setback, the Eagan store held on.
Since then, others in the industry have begun to tumble, including Blockbuster, which has closed 15 stores in Minnesota alone.
During its heyday, Blockbuster would negotiate deals with the studios that would also benefit small stores, Lozinski said.
“With so many closing, we are losing those deals and it’s becoming harder to make money,” he said.
Though his store continues to break even, Lozinski said, he and his brother realized the boom was over and it wasn’t coming back.