By S. Pajot
By Tim Elfrink
By Tim Elfrink
By Kyle Munzenrieder
By Tim Elfrink
By Michael E. Miller
By Kyle Munzenrieder
By Kyle Munzenrieder
Richard Zeeman is scowling again. He's been doing that a lot recently. Business is bad. Three days a week (down from six when demand for Zeeman's services peaked in 1989) he leaves his North Miami office at noon (Zeeman used to leave an hour or two earlier) and piles into his faded two-tone 1979 Chevy van. With its interior shelving and antitheft steel cage protecting the videos he carries in back, the van, like its owner and the independent video stores Zeeman services, has seen better days. Zeeman is a mobile independent video trader, one of the last of a dying breed. He drives from small independent video rental store to small independent video rental store, buying, selling, and swapping tapes. "The mom-and-pops are dead," declares Zeeman, referring to the neighborhood stores that flourished eight to ten years ago but that have all but vanished recently. "Business stinks."
Zeeman has been servicing the tri-county area (Dade, Broward, and Palm Beach) for seven years. In 1989 he tallied over 200 small video stores on his active client roster. In May 1993 he was down to half that, and the list continues to shrink. And not only has the sheer number of mom-and-pops in his customer base declined, but so has the dollar volume of the survivors' businesses.
"The small store that was only able to afford [to rent] videos is history," asserts Zeeman as he waits out a traffic jam on the 836 expressway. "They've had to diversify into renting video games and laser discs, repairing VCRs, selling candy, putting arcade games in the store."
Rick Veingrad concurs. Veingrad owns three Video Connection stores in Broward County and is outgoing president of the South Florida chapter of the Video Software Dealers Association (VSDA), the national trade organization for video retailers. "We're trying not to focus on videos as much," Veingrad confides. "It's no secret that video rentals have tapered off or fallen recently. We're getting into other things. We've done well with beeper sales; we've been involved with CD-ROM for six months. We had a Ticketmaster outlet in our Hollywood store, but they just pulled out because we're not part of a big enough chain. That hurt. December was a disaster locally, but there was nothing we could do about it. The weather's been fantastic, and competition from TV -- the Dolphins game on New Year's Eve -- spoiled what is usually our biggest day of the year for rentals."
Veingrad sounds like a man on the edge of burnout. "I can remember when we first opened and it was just my sister and myself," Veingrad reminisces. "On slow afternoons we could literally take a nap in back."
Richard Zeeman has had to alter the nature of his product mix to reflect that of his customers. "Adult videos have become the last refuge of the mom-and-pops because Blockbuster doesn't carry them," claims Zeeman, referencing the imperious chain's policy of not stocking any title rated NC-17 or worse. Which is to say, Debbie doesn't do Dallas at Blockbuster. "My business swung from being a general title distributor with one or two adult films to now where it's become 85 to 90 percent of my business.
"My accessories business has been cut to almost nonexistent," he laments. "I used to sell a full line of accessories -- rewinders, blank tapes, stickers, labels, Styrofoam inserts, plastic cases. I've had blank tapes in my van for a year now I can't get rid of. The furthest south I drive now is Coconut Grove. I used to have regular customers in Homestead, Florida City. The hurricane didn't help any, but it was getting bad before that.
"The only survivor in North Miami proper is Bob Rich," Zeeman continues. "I personally had five or six accounts that have closed in that area. But North Miami doesn't allow adult videos. Bob Rich was one of the first in the area, so he was grandfathered in [to sell adult videos]."
Zeeman points to the emergence of the video superstore, especially Blockbuster Video, as the leading cause of death for the mom-and-pops. Most of Zeeman's former clients were 1500- to 3000-title operations occupying less than 1500 square feet of space in a strip shopping center. The video superstore stocks 10,000 or more tapes spread over twice as much square footage in a freestanding building. The superstore trend is not limited to video rental; neighborhood grocery, hardware, office supply, and sporting goods shops have been rendered obsolete by massive warehouse-style markets (Office Depot, Home Depot, Costco, Sam's Club, the Sports Authority, et cetera). One characteristic that distinguishes the video industry, however, is that most of the smaller video stores are (or were) cheaper than Blockbuster, while most mom-and-pop grocery, hardware, office supply, and sporting goods stores are more expensive than their gargantuan competitors. Blockbuster did not become the industry giant on the strength of discount pricing.
So how did it happen? Ernest Tornabell, who owned Astro Video on West Dixie Highway and 145th Street for four years before finally going under on December 31, 1993, thinks he knows. "Blockbuster and the others [superstores] have more money up-front, and they use it well," Tornabell reasons. "They're very good at marketing.
"I think it's wrong to put all the blame on Blockbuster for the death of the mom-and-pops, though," Tornabell expounds. "People see sell-throughs [titles such as The Flintstones or most Disney films that studios market directly to the public] for fifteen or twenty dollars and they think that's what we pay for every tape. When I first started, we were paying $50 to $54 for tapes. By the end [four years later] we were up to $60 to $65. Most people have no idea that video stores pay that much. Maybe Blockbuster gets a discount of a few percent, but even they have to pay a lot. At two dollars a night, that's an extra five nights you have to rent it out. But the popularity of most new releases drops off rapidly after two weeks. How can you make any money like that? You'd have to rent a tape every single night for a month just to break even."
Rene Curbelo, owner of Video Pursuit on Miami Gardens Drive in North Miami Beach, agrees that it has become much harder to make a profit renting new releases, and bemoans the fact that movie-lovers are inundated with opportunities to see their favorite films. "Five years ago you didn't have to worry about pay-per-view, you didn't have Encore [a commercial-free 24-hour movie channel]. Customers don't perceive video as a novelty any more. When I first opened, they would come into the store and find a movie on the shelf they hadn't seen in fifteen or twenty years and be so happy they'd rent it. By now they've probably been bombarded with it. So the business has become new-release driven. Some small stores do as much as 50 percent of their business in new releases. Those are the stores in the deepest trouble. It gets very expensive."
The reflective, soft-spoken 47-year-old hasn't thrived for ten years by making the same mistake. While Curbelo is quick to agree with the overall view that the attrition rate for independent video stores has been extremely high, he has somehow managed to prosper amid the carnage. "Since we opened our doors on February 15, 1985, 22 stores have come and gone in the area from 163rd Street to County Line Road," he explains. "When video was emerging [in the mid-Eighties], it was a time in the overall South Florida economy when a lot of money was being laundered. A lot of people jumped into video without doing their homework. But just because you have the money doesn't mean you've got the smarts."
Today there are only two independent video stores serving that same territory (as well as one Spec's and two Blockbusters). "It's a much tougher business today than it was a few years ago," Curbelo allows. "I see my competition not as Blockbuster but as anything that attracts my customers' leisure time. The Marlins, Dolphins, Heat A we notice dips in business during big games. Weather is a big factor, too. It used to be that just about anybody with a few thousand dollars could run a successful video store. You have to be smart and stay on top of the technology. You can't run it like a mom-and-pop business. If you do, you probably won't survive."
Curbelo is probably not typical of the average mom-and-pop store owner. He has a bachelor's degree in business administration from UM, and was working as a licensed commercial contractor when he decided "to drop out of the rat race." Following the advice of a friend of his brother-in-law who owned a small chain of video stores in New Jersey ("Every day you wait to start is a day you're throwing money away," the friend advised him), Curbelo invested his $30,000 nest egg in opening Video Pursuit in February 1985.
"It's amazing that I succeeded," he admits. "A lot of decisions that I made, like picking this location [in a busy strip mall just west of Biscayne Boulevard] were dumb luck. It was my first retail venture. I started with 450 tapes. We were one-third the size we now are. Maybe the construction business gave me a sense of professionalism that a lot of other stores didn't have back then. You can't make as much money in video as you can in construction, but you'll live a lot longer and you'll be a lot happier. I'd never go back."
Curbelo has embraced diversification along the way. As you enter his colorful, brightly lighted 2400-square-foot store, you are immediately tempted by eye-catching displays for candy, popcorn, greeting cards, gourmet lollipops, sell-through titles (Jurassic Park, The Nightmare Before Christmas, The Flintstones), and beepers. Rentals of laser discs, adult films (Curbelo is a little more circumspect than Zeeman on the topic but freely admits that they are the most profitable segment of his business, contributing between 12 and 25 percent to his gross income even though they make up less than 10 percent of his inventory and cost a fraction of the price of general releases to buy), video games, and CD-ROM software are essential ingredients in the product mix. As if all that weren't enough, Curbelo runs a second business, a computer consulting and software design firm he calls Digital Pursuit.
As his store became more dependent on computers for accounting and inventory control, Curbelo dug into the technology with relish. "It became more than a hobby very quickly," Curbelo recalls. "One day we developed a problem and I knew more about our system than the repairman who came out to fix it. I started offering CD-ROM installation and small-scale troubleshooting to a few of my customers who asked for it, and that eventually led me into programming and writing software." The contractor/video store proprietor/data processing consultant has crafted real estate management and wedding consultant programs to complement the mainstay of his computer business, a video store management program he is considering marketing nationally.
Not surprisingly Curbelo sees technology -- particularly CD-ROM -- as the mom-and-pops's best hope for the future. "When I first opened, fifteen percent of American households had VCRs. Now it's eighty-seven percent. This year  fifteen percent of American households had PCs, and better than half of those had CD-ROM. If the analogy follows, there's enormous potential growth in the CD-ROM market."
Even such cautious optimism does not infect Zeeman. "The last really good year for the mom-and-pops was 1989. That's when Blockbuster really started taking off," he explains. "When some of the larger mom-and-pops realized that as a small independent they didn't stand a chance in hell, they tried to upgrade to superstores themselves. That's what Rene did and it worked for him. But it didn't work for everyone. One of my best customers, L.P.D. Video in Miami Lakes, expanded their store. They bought thousands of titles. Then Monster Video [a local chain] and Blockbuster both opened a few blocks away. One of them had to lose. It was my customer. Even if you get big, it's tough to compete with a chain."
Zeeman ticks off the names of former clients from Homestead to Wellington that have closed in the last four years. He sounds like a World War I veteran reciting the names of Army buddies he has outlived. "Grand Video in West Palm, that guy had four strong stores and now he's gone," Zeeman muses. He pauses for a beat, then adds, under his breath, "They're all gone."
"Squelch the doomsayers!" crows Chris Arns, vice president of sales for the Illinois-based Baker and Taylor, the nation's second-largest distributor of videotapes. (Most movie studios have home-video divisions, which sell tapes to distributors who then market them to retail outlets.) As you might expect of a man who sells videotapes by the tens of thousands for a living, Arns is bullish on the video business. "My own mother was shaking her head the other day, saying, 'This interest in videos won't last.' My own mother!
"Videos are the greatest entertainment value there ever was. When you think that you can buy a major feature film that cost over $100 million to produce for only fifteen dollars, that's amazing. Everybody talks about the looming information superhighway and what that will mean. Well, right now, December 29, 1994, it doesn't mean much. There's an installed base of 85 million VCRs in this country. The developers of new technology like Matsushita, Phillips, and Sony have been very good at publicizing their advancements. But video sale and rental is still a $12 billion a year industry, projected to grow to $17 billion by 2004." (A recent study done by communications and entertainment industry consultants Paul Kagan Associates, Inc., estimates $15.2 billion in 1995 and $19.3 billion by the year 2000.)
"Of course," Arns continues, barely pausing for breath, "it's probably true that the mom-and-pops aren't in the best position to ride the growth, especially in sell-through where you have the proliferation of video departments in chains like Wal-Mart, Kmart, Phar-mor, and so on. Not that many years ago it was very easy to get into. All it took was a small investment. With $30,000 [coincidentally, the exact amount Curbelo used to open Video Pursuit] anybody could open a store. You might have had some people who thought they could put a bunch of videos on a wall and read magazines all day, and for a while they might have been right. Most of them were probably undercapitalized from the start. Those days are probably over."
The Baker and Taylor VP sees potential for independents serving two extremely disparate markets: densely populated inner cities and sparsely populated rural areas. "The real fighting ground is the middle-class, suburban market," he points out. "Right now the action is in the regional chains. Blockbuster is obviously number one [in market share]. But it's a long way from number one to number two. If Blockbuster is McDonald's, then who's Burger King? There really isn't one. We've seen a lot of mergers and alignments of smaller companies attempting to position themselves to better compete. There have been as many IPOs [initial public offerings of stock] this year  as ever. Hollywood Video from Portland, Oregon, and Movie Gallery in Dothan, Alabama, are two regional chains that have performed well. Now the battle is on to see who will play second fiddle to Blockbuster."
Earl Page, retail editor of Video Business and Video Software magazines, two leading industry trade publications, agrees with Arns's assessment. "Right now is both the best of times and the worst of times for mom-and-pop video stores," he theorizes. "It's the best of times if they're good enough and large enough to be a candidate for the frenzy of acquisitions going on in the video rental industry. It's the worst of times if they're not. The opportunities are out there. But you have to be smart and entrepreneurial."
Joe Mason, videotape broker and Veingrad's successor as VSDA president, echoes Page's appraisal. He also sympathizes with door-to-door trader Richard Zeeman's predicament. Mason used to compete directly with Zeeman, and at one time had four vans on the road. He has changed his emphasis, however, to telemarketing and brokering on a national level, and has been pleased with the results.
"Certainly the business was easier six or seven years ago," Mason recalls. "The image of the small store owner sitting behind the counter and reading magazines may have had some truth to it back then. But the guy who didn't do that, who managed his business professionally, now has maybe six or seven stores and is looking to sell out to one of the regional chains. And then you have the cases of people who open a store with twenty or thirty thousand dollars. That's especially popular in Hialeah. In the business we call that 'buying a salary.' You hire an in-law to run the store while you work all day at some coming-to-America job, then you run the store at night. Most video stores are open seven days a week, so you never have a day off. It's a very tough road. New owners usually don't realize the hours and the commitment you need going in, and some just give up after a few months."
Mason likens many of the proprietors of video stores in the early days to "restaurant owners who didn't know how to cook." But while he agrees that the traditional mom-and-pops may be history, he is not ready to sign the death warrant of the independent video retailer. "That may be true in one sense but it fails to capture all the nuances," he hedges. After more than a decade working at all levels of the video business, Mason has learned to shy away from blanket statements. He points to the recent demise, after thirteen years in operation, of a popular local independent store as an example of why it's so hard to generalize. (Mason tactfully declines to name the store for the record.) "The original owner ran it for ten years, then sold it three years ago," he explains. "It was quite healthy at the time. But the new owners were absentee. They would only stock one or two copies of popular new releases; they weren't in control of the business. You have to pay video stores close attention. But all people see is a thirteen-year-old store closing its doors."
By Mason's count there are some 150 video stores (excluding more than twenty Blockbuster outlets) in Dade. The majority are, in his opinion, doing well. "Sometimes you even get the surfing effect," he chuckles. "An independent opens right next door to a Blockbuster. Blockbuster doesn't stock adult films, so any of their customers who want adult films will go next door. And that's a lot of customers. Plus, Blockbuster may have 30 copies of Wyatt Earp, but not 31. [The surfer] may have that thirty-first. That scenario is repeated over and over. Let the big guys do all the marketing to bring in the customers, and then capitalize on the spillover."
Ernest Tornabell maintains that the blue-and-yellow giant fosters the illusion of having great selection. "You go into Blockbuster, you see all those movies on the wall," he observes. "Of course they're never there. You go in and try to find a new release, they don't have it. But they've always got plenty of empty boxes on the shelf."
Mason responds guardedly to the oft-whispered assertion that Blockbuster actively has pursued the eradication of the mom-and-pops from the retail video landscape. "Did they [Blockbuster] single-handedly try to eliminate the mom-and-pops? Absolutely not. Was their philosophy self-serving? Of course," Mason contends. "Maybe they've behaved in a highhanded manner, but they've played within the rules. They have the business acumen and the capital behind them. It may seem cold and ruthless when they move into a territory where an existing store forgot to sign an exclusivity agreement with the landlord or whatever, but whose fault is that, really?
"In a sense, Blockbuster has helped the business," the broker continues. "They've acquired quite a few locals and independents at prices very lucrative to the sellers. They've forced the mom-and-pops to be bigger and better. And they fulfill a very important role for the whole industry when they defend their own interests in cases such as maintaining the windows [the time between a movie's release on video and its release on cable or pay-TV]."
Video Pursuit's Rene Curbelo, vice president of the local VSDA chapter, is a little less generous when it comes to assessing the big chain's business practices. "When Barbra Streisand did her big tour recently," he says by way of illustration, "she released a video which was in great demand. Her fans are very loyal and there are a lot of them, and this was the first opportunity to see her in concert in years. Blockbuster got a special version of the video with one song added that wasn't available to anyone else. There was a huge uproar. To protest the preferential treatment, almost no independents bought the tape. The distributors got the message: Unless you want to sell only to Blockbuster, never do that again.
"There was another controversy over Blockbuster violating street-date restrictions [distributors may ship out copies of a movie a few days before it is scheduled to be released; stores are not supposed to rent these out until a day recognized industrywide as the street date]. Blockbuster is a member of the VSDA, but their stores make up only about ten percent of the national membership. When an issue like that comes up, there's an uproar and things change."
But they haven't changed enough to please Richard Zeeman as he lumbers through South Florida traffic in his sixteen-year-old van. "From '89 to now it's gone straight downhill and don't let anybody tell you different," he admonishes. "And a big part of that is Blockbuster going into areas with a lot of mom-and-pops and blowing them away. [My old customers] used to pay me for service, credibility, advice, and experience, and they offered their customers the same things. Those things don't seem to count much to people any more."
If Rene Curbelo is a shining example of the old wave of independent video-store owners, Kevin and Rose Yoham of Cinema Pizza represent the new breed. It doesn't get any more mom-and-pop than this husband-and-wife team who share a house with their three daughters and a cat named Sparky just around the corner from the small store they opened a few months ago in Country Walk. Kevin, age 30, is a former video store clerk and Domino's Pizza employee who, with the help of a loan from his father, finally has realized his dream of combining the two businesses under one roof. Thirty-two-year-old Rose is an insurance adjuster with a sharp eye for detail and a drive to develop their concept into a national chain.
"We bought our house, started the business, and got married within a couple of months," chirps the quick-talking Rose, a petite dynamo who would be played by either Holly Hunter or Markie Post should the Yohams' story ever make it to film (or video). While quieter than his wife and built like a construction worker (a job he held after Hurricane Andrew), Kevin is equally optimistic about Cinema Pizza's chances for whetting customers' -- and potential investors' and franchisees' -- appetites.
"The store's only been open eight months, and we've only had pizza for two. We haven't even done any advertising yet, but we're already getting a lot of orders. The response has been great," he says enthusiastically. "The idea of combining food and other types of entertainment has been around for a while. McDonald's has sold videos, Taco Bell sells CDs. But as far as we know, no one in South Florida is doing what we're doing, combining food, video, and delivery. But it seems like a natural."
"We had to pull licenses and permits for two separate businesses," adds Rose. "We have two separate sales tax numbers. It makes the bookkeeping a real chore. Everybody [at the licensing offices] said we were the first. We're really excited." And definitely not dead.
Of course Ernesto Tornabell was excited once, too. "What happened was, I didn't know enough. Location, location, location A that was the main reason [that Astro failed]," he surmises. "I started out making profits. But by '92 Blockbuster was coming on, other stores had opened, and people just weren't as interested in renting movies. I wish I had advertised differently. But that's all Monday-morning quarterbacking. Would I go back into it now? Hell, no. The future's called AT&T and the RCA mini-satellite dish. You can even kiss Blockbuster goodbye. [Former Blockbuster chairman H. Wayne] Huizenga's not a dumb guy. He got out while the getting is good.
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