Study: In-store DVD rentals are falling off fast

LOS ANGELES —A new report predicts that in-store DVD rentals will capture less than half the rental market by 2010, presenting a problem for major chains with thousands of storefronts across the country.

A Convergence Consulting Group report entitled “The Battle for the American Couch Potato: New Challenges and Opportunities in the Content Market,” predicts in-store DVD rentals at chains like Blockbuster will account for just 44% of the market by 2010. The report says online services that deliver by mail like Netflix and Blockbuster Online will account for 37%, with DVD rental kiosks generating 11% and rental downloads accounting for 7%.

Those numbers reflect a major change from 2007 when in-store rentals accounted for 71% of the market, compared to 25% for mail order, 4% from kiosks and 1% online.

Convergence president Brahm Eiley said the company “took a very conservative view” in its projections and added that mail-order rentals will exceed those in stores by 2011. The company also predicts annual rental revenue will fall to $7 billion by 2010, compared to $7.6 billion in 2007.

The forecast doesn’t bode well for DVD rental chains, Movie Gallery in particular. The No. 2 rental chain with 3,300 stores filed for Chapter 11 bankruptcy last fall and has closed hundreds of stores since then as it struggles to remain solvent.