The Two-Way
2:18 pm
Fri November 8, 2013

Blockbuster Fades Out, But Some Zombie Stores Will Live On

Originally published on Fri November 8, 2013 5:08 pm

Blockbuster was once the king of movie rental stores. At its peak, it had about 60,000 employees and more than 9,000 stores.

But after struggling for several years, the chain is breathing its last gasp. Dish Network, which bought Blockbuster in a 2011 bankruptcy auction, says it will close the remaining 300 or so company-owned stores by January.

On Twitter, it put out a call for "Blockbuster Memories."

But don't be surprised if you stumble across an open Blockbuster in Alaska or Texas. In those states, 26 stores are owned by the Austin, Texas-based Border Entertainment. They're among roughly 50 franchises or licensees that will live on after the parent company shuts down, becoming what are often called "zombie" stores.

Border Entertainment's president, Alan Payne, tells All Things Considered host Melissa Block that while business isn't what it was a few years ago, his stores are still profitable.

"We've managed to make it work," he says. "We've just been totally focused on what the stores could do that our competition could not do."

That means maintaining a large selection, keeping prices low and knowing your customers. In Payne's stores, an older movie that you wouldn't find in a Redbox kiosk costs only 49 cents a day, or 99 cents a week.

Although Dish Network blamed the downfall of video stores on the rise of digital distribution, Payne says not all consumers have gone online.

"If you're sitting at home right now and you don't want to buy a movie, you want to rent one, the only place you can really do that is online," he says. "A lot of people don't know how to do that. And the ones that do, it would cost them $3 or $4."

And especially for customers in his Alaska stores, expensive Internet access might keep them from streaming movies online in the first place.

Payne says the final closures shouldn't make that big of a mark on his business. The stores will license Blockbuster's trademark, print their own materials and change out their computer system.

Getting movies won't be any harder, he says, because Border Entertainment buys them from a wholesale distributor. And sometimes, the company just sends a store manager out to buy multiple copies.

"It sounds crazy, but most mass merchants that sell movies sell them at cost," he says. "So we can go to Wal-Mart, for example, and we'll pay about the same price to them that we would pay to a wholesale distributor."

Payne estimates his niche business will still be good for at least another two or three years. The company currently has about 40,000 people coming through its stores every week.

"I don't have my head in the sand. I know that we're challenged by all the technology," he says. "But I haven't given up on the opportunity that it might flatten out at some point. So that's what we work toward — but we have to be realistic and realize that it is declining."

Ultimately, Payne says it's not just a good selection and low prices that have kept customers coming back to his Blockbusters as the chain dissolved around them.

"Part of why people come, obviously, is for the community experience of seeing friends and seeing our employees in the stores that obviously know movies," he says. "That's part of why we're still here, because a lot of people like that experience."

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

The Blockbuster movie rental chain is breathing its last gasp. A few years ago the company closed thousands of stores, went into bankruptcy, then was bought by Dish Network. And now Dish says 300 remaining Blockbuster stores will be closed by early January. While the parent company is shutting down its stores, don't be surprised if you see the Blockbuster name if you happen to be in Alaska or Texas. They're Blockbuster franchises owned by Border Entertainment and those stores will stay open.

The president of Border Entertainment, Alan Payne, joins me from Austin to explain why. Mr. Payne, welcome to the program.

ALAN PAYNE: Hello. Glad to be here.

BLOCK: And along with stores there in Texas, you also have franchises in Alaska from Juneau to Kenai to North Pole. They have the Blockbuster sign I guess and they will stay open. So are brick and mortar movie rental stories still a viable business model for you?

PAYNE: Well, it's obviously viable or we wouldn't still be open. We're still profitable. The business is not what it was three or four years ago. It has declined but we've managed to make it work.

BLOCK: Well, how have you managed to do that because Dish says demand has clearly moved to digital distribution, people streaming movies and renting online. How do you do it?

PAYNE: We've just been totally focused on what the stores could do that our competition could not do. And that involves real low prices, large inventories that are tailored to the markets that we're in. And, you know, if you think about it, if you're sitting at home right now and you don't want to buy a movie, you want to rent one, the only place you can really do that is online. And a lot of people don't know how to do that. And the ones that do, it would cost them $3 or $4. So in our stores that movie rents for 49 cents a day.

BLOCK: Well, how will you keep getting movies if Blockbuster is gone?

PAYNE: Well, they've never supplied us movies and we've always bought movies through wholesale distribution. And in some cases for movies that are coming from studios that don't want to sell wholesale to us, and there are a couple, we actually go to retail stores and buy them.

BLOCK: You just go out and buy them and then rent them.

PAYNE: Yes, yes.

BLOCK: And that works? That's a model that works?

PAYNE: It sounds crazy but most mass merchants that sell movies sell them at cost. So we can go to Walmart, for example, and we'll pay about the same price to them that we would pay through a wholesale distributor.

BLOCK: Well, one thing I've read, Mr. Payne, is that at least in Alaska your business has helped because a bunch of people wouldn't have inexpensive Internet access. They wouldn't have the bandwidth to be able to easily stream movies. So they need to come to you to rent them.

PAYNE: Yeah, you know, one of our competitors obviously is online streaming. And that consumes a lot of bandwidth. So most of the Internet providers in Alaska, as I understand it, they charge more to heavy users.

BLOCK: Well, Mr. Payne, do you look forward and see an endpoint? I mean, do you assume that you can stay viable as a movie rental business indefinitely?

PAYNE: You know, the business is declining but it's slow. And I don't have my head in the sand. I know that we're challenged by all the technology. But I haven't given up on the opportunity that it might flatten out at some point, you know. So that's what we work toward but, you know, we have to be realistic and realize that it is declining.

BLOCK: Mm-hmm. You know, I wonder if managers of these stores are hearing from people who still like the notion that they can come in and maybe ask for advice about a movie or get something recommended by the person behind the counter.

PAYNE: Well, we have about 40,000 people through our stores every week through 26 stores. The stores are busy. Part of why people come obviously is for the community experience of seeing friends and seeing people, you know, our employees in the stores that obviously know movies. So that's part of why we're still here because a lot of people like that experience.

BLOCK: Well, Mr. Payne, thanks for talking to us. Best of luck.

PAYNE: Thank you.

BLOCK: That's Alan Payne, president of Border Entertainment which owns 26 Blockbuster franchises in Alaska and Texas that will stay open even after Blockbuster's parent company shutters hundreds more. Transcript provided by NPR, Copyright NPR.

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