Who shot the video store and how did Glenview, Illinois-based Family Video survive to thrive and still rent movies (and now sell pizza)?

While I well remember moving back to Peterborough from downtown Toronto in 1985 and living on Union Street in Peterborough, Ontario, some of the technological markers and milestones that came with the 1980s, were novelties at first; their impact on the popular culture, I only came to fully appreciate a bit later.

Take VCRs and the notion of renting videos for home movie viewing for instance. As a print journalism student at Loyalist College in Belleville, Ontario, writing for the college paper, The Pioneer, I had written a bit about the landmark prosecution under the old federal Copyright Act of Kawartha TV & Stereo at Park Street South and Lansdowne Street West in Peterborough in 1983, after an RCMP investigation involving allegedly bootleg videotapes. And I had also casually followed the analog videotape format cassette contest over the preceding decade between Sony’s Betamax video cassette, launched in 1975, and JVC’ s rival VHS cassette, which debuted a year later in 1976 – and eventually became the market leader after a long battle between the two (Sony announced last November it will stop selling Betamax video cassettes in March. Most studios stopped releasing videos in VHS format in 2006 and the last videocassette recorder (VCR) was manufactured in October 2008). But I hadn’t followed it all that closely since I didn’t own a VCR at the time that would play either of the incompatible formats.

Ted’s Place on Charlotte Street in downtown Peterborough changed all that for me in 1985 when I moved back to Peterborough, Ontario after a five-year hiatus living in Peterborough, New Hampshire, Boston, Belleville, Kingston, Cornwall, Oshawa and Toronto. You didn’t need a VCR renting movies from Ted Leveck. Ted would rent the machine to you also, along with the movies. As I recall, the rental VCR machine came in a bright radioactive Yellow 3 hard carrying case (sure to deter to theft by customers, I suppose, or perhaps a crime-of-opportunity mugging from a passerby, albeit not a common occurrence in mid-1980s Peterborough).

The VCR machine and yellow carrying case weighed, oh, I don’t know, about a ton combined, I suspect, as you struggled bravely to carry them either down the street home, or back to your vehicle, depending where you lived in relation to Ted’s Place, which you then set up when you got home to perhaps watch Back to the Future, Witness or The Breakfast Club for the first time. Picture, if you will, carrying the VCR in its yellow Ted’s Place case, as being in an admittedly less discrete way, due to its vibrant yellow colour, something like a White House military aide carrying the so-called “nuclear football,” more properly known as the president’s leather emergency satchel, which got its nickname because an early version of the SIOP (Single Integrated Operational Plan), the United States’ nuclear war plan code-named “dropkick,” and you’ve pretty much got the picture of both the mid-1980s VCR rental carrying case and geopolitics in the Age of Reagan.

At its zenith in the late 1980s, Ted Leveck had 100 VCR machines on any given day for rent going out the door and a backroom chock-a-block full of 10,000 VHS movies. Ted rented movies for almost 35 years from his location at 290 Charlotte St. in downtown Peterborough with his rental price of $2 each or three for $5 remaining unchanged. He closed his doors in the fall of 2013, two years after his wife, Brenda, died. Ted told Lance Anderson of Peterborough This Week that he wanted to retire while his health was good, and that he had other things he’d like to focus on, such as disc jokey-karaoke business, which he’d been operating as a sideline for years. “I like doing that and will have more time to do what I want to do,” Leveck said (http://www.mykawartha.com/news-story/4186863-ted-s-place-closing-down/).

When I found myself living and working in Yellowknife in 2001, Choice Video at 4915 48th St. was a good and loyal friend through many a January winter night in the Northwest Territories. When the Indian Residential Schools Truth and Reconciliation Commission visited Thompson, Manitoba at Riverlodge Place at 351 Jasper Ave. for two days of hearings on Sept. 25 and 26, 2012, I found myself during a break chatting with Commissioner Marie Wilson, a well-known former CBC broadcast journalist and manager from Yellowknife, who spent most of her career in the North, and has been married for 40 years to former NWT premier Stephen Kakfwi, who is Slavey and from Fort Good Hope in the Sahtu in the lower Mackenzie Valley. Stephen was premier when I lived in the NWT and we joked about how in Yk 15 years ago, it wasn’t at all unusual for a journalist to bump into the premier on a Saturday night at Choice Video as they both browsed for a video to enjoy at their leisure. Perhaps not so likely in Toronto. Sadly, Choice Video closed its doors in 2013.

What killed the video movie rental business over the last five years with the exception of a handful of interesting and exceptional outliers such as Chicago-based Family Video is still a matter of some debate. Netflix, the California company founded in 1997 and famous for riding the tide from its original core business model of mailing out DVDs to customers for rental to becoming a huge provider of video-on-demand via the Internet when the DVD business died one day in 2011, is often blamed as a major culprit, but really all Netflix was doing was adapting to at-home movie watchers trending toward video-on-demand; a trend that impacted their old business model just as negatively as bricks-and-mortar video stores chains, such as Blockbuster, which operated internationally in the United States, Canada, Australia, Brazil, Denmark, Ireland, Japan, Peru and the United Kingdom.

Blockbuster’s major competitors in the United States and Canada included Wilsonville, Oregon-based Hollywood Video, founded in 1988, and Dothan, Alabama-based Movie Gallery, founded also in 1985 like Blockbuster. Movie Gallery eventually took over the larger Hollywood Video 10 years ago in January 2005, but all three entities – Blockbuster, Hollywood Video and Movie Gallery all ended up in bankruptcy proceedings.

While Netflix and video-on-demand via the Internet is routinely proffered as the explanation for Blockbusters demise, other observers blame the company’s penchant for negotiating top-of-the market expensive leases at many of its locations that it was locked into and unable to renegotiate with its landlords when everything went south, combined with its infamous “late fees,” which were deeply unpopular with customers, as other important factors in killing the chain.

Truth is the drop in demand for DVD rentals, combined with an ill-timed price increase in 2011, also resulted in a heavy hit for Netflix, which lost 800,000 U.S. subscribers in the third quarter of 2011, while its stock price plunged 35 percent and the company lost more than $11 billion in value, before rebounding.

Blockbuster closed its doors here in Canada in the fall of 2011 because Grant Thornton Ltd., the court-appointed bankruptcy receiver of Blockbuster Canada Co., couldn’t find a buyer for the rental retailer’s remaining 253 retail stores and related operations.

In Canada, Blockbuster was also competing against Rogers, which closed its Rogers Plus corporate store in the Burntwood Plaza here in Thompson, across the street on Selkirk Avenue from where Blockbuster was in Thompson Plaza, in December 2011, less than four months after Blockbuster closed on the other side of the street, and just as the Blu-ray optical disc format, which has more than five times the storage capacity of traditional DVDs and can hold up to 25GB on a single-layer disc and 50GB on a dual-layer disc, appeared for one brief moment to matter before video-on-demand left both formats on the shelf.

Mark Matiasek, then general manager of Thompson Community Development Corporation, better known as Thompson Unlimited, the city’s economic development corporation established in 2003, called what was happening to video chain stores in Thompson and elsewhere at the time an example of “globalization at the local level.” By mid-April 2012, Rogers had exited the video rental market across Canada at its remaining 460 locations. With the video business making up less than one per cent of the company’s annual revenues, Rogers said it had been planning its exit since 2009 from what it also said was a money-losing rental business for them. A big part of Rogers’ strategy to meet and beat that competition was Rogers On Demand Online, offering premium produced video entertainment on the web with on-demand access to hit TV shows, movies and clips along with web-only exclusives and more, “anywhere, anytime,” Leigh-Ann Popek, senior manager for media relations for Rogers Communications Inc. in Toronto, said in an interview Dec. 5, 2011. Members could watch their favorite shows and discover new ones, whether at home, at the office or on the go. Rogers Communications Inc. operates Rogers Wireless, Canada’s largest wireless voice and data communications services provider, Rogers Media and Rogers Cable. In September 2010, Rogers Communications Inc. announced it had nearly 250,000 Rogers On Demand Online customers, 10 per cent of its cable customer base at the time, and was ready to roll out Rogers On Demand Online rentals Canada-wide as of October 2010.

Englewood, Colorado-based market research firm IHS said in April 2012 the number of video stores had been in contraction since lower cost movie rental kiosks and online streaming offerings, such as on-demand movies and services such as Netflix entered the mainstream. According to statistics from IHS, 2012 would mark the first year that the number of TV shows and movies legally streamed and downloaded from online sources would surpass the demand for those films and shows on physical discs, such as DVDs.

IHS said at the peak of popularity for movie rentals in 1989 there were more than 70,000 stores, including grocery stores and local rental shops, offering movie rentals in the United States. Just 11 years later in 2000 that number had already dropped dramatically to 27,882. The number comes from a  study that included stores that offered more than 100 copies of movies for rent and derived at least half of their incomes from video and DVD rentals.

Blockbuster was once the king of movie rental stores. At its peak, it had about 60,000 employees and more than 9,000 stores. On May 24, 2011, Blockbuster announced that that 146 stores, accounting for approximately 35 per cent of the company’s stores in Canada, would be shut down effective June 18, 2011, resulting in the loss of about 1,400 employees jobs.

On Aug. 31, 2011 Blockbuster announced that no buyer could be found for the remaining 253 stores that were acceptable to the court-appointed bankruptcy receiver, and that it would wind down operations and liquidate all remaining Blockbuster stores by Dec. 31, 2011, allowing it to benefit from the holiday shopping season in markets that warranted it.

Blockbuster opened its first store in Dallas in 1985 and in Canada in 1989. The formerly profitable Blockbuster Canada was an indirect wholly-owned subsidiary of the long-troubled American parent company Blockbuster Inc. On March 31, 2010, Blockbuster Canada provided an unlimited guarantee toward the financial obligations of Blockbuster Inc. to Hollywood movie studios to ensure the continued supply of DVD product to Blockbuster stores in both countries. Blockbuster in the United States, however, filed for bankruptcy protection less than six months later on Sept. 23, 2010 and Dish Network, another Englewood, Colorado-based company, purchased its American assets on April 11, 2011. Through mid-January 2011, however, Blockbuster Inc. racked up some US $70 million in unpaid obligations to the studios, for which they demanded payment from Blockbuster Canada in February 2011, sealing the demise of the Canadian operation.

Blockbuster’s store here had good enough revenues that when 146 stores, accounting for approximately 35 per cent of the company’s stores in Canada, were closed on June 18, 2011, Thompson wasn’t among them. But when on Aug. 3, 2011 Blockbuster announced that no buyer could be found for the remaining 253 Canadian Blockbuster stores that were acceptable to the court-appointed bankruptcy receiver, and that it would wind down operations at the rest of the stores by Dec. 31, 2011. The Thompson Blockbuster, located in Thompson Plaza, closed in September.

Believe it or not, there are still about 35 Blockbuster video stores converted from franchises to cheaper-to-operate Dish Network licensees that lived on after the parent company shut down in January 2014, becoming what are often called “zombie” stores in Alaska and Texas, where 19 of them are owned by Alan Payne of Austin, Texas-based Border Entertainment. He is still running  10 Blockbuster stores in Texas along the United States-Mexico border, one each in Mission, McAllen, Edinburg, Harlingen, Weslaco and five in El Paso, and another nine stores in Alaska, including in Sarah Palin’s hometown of Wasilla.

Rentrak Corporation, a Portland, Oregon-based global media measurement and research company serving the entertainment industry, reports the U.S. video rental business has collapsed from more than 19,000 brick-and-mortar stores at its peak to 4,445 as of last month. But Chicago area Family Video has added stores in recent years, “attracting customers who don’t like the selection at Redbox or who don’t want to commit to a digital subscription with Netflix,” Indianapolis Star staff reporter James Briggs notes in a fascinating story published Dec. 30, 2015, which you can read here in its entirety at http://www.indystar.com/story/money/2015/12/30/you-can-still-rent-movies-indy-family-videos-ceo-explains-why-wont-change/77475656/

Redbox Automated Retail, LLC, headquartered in Oakbrook Terrace, Illinois, was founded in 2002 by McDonald’s – as in the hamburger folks from Illinois also –and its distinctive bright red kiosks, which take up less than 12 square feet of a retailer’s space, are within a five-minute drive of nearly 68 per cent of the population of the United States, says Outerwall Inc., of Bellevue, Washington, which now owns Redbox. The company’s signature red colour kiosks are located at convenience stores, fast food restaurants, grocery stores, mass retailers and pharmacies.

The company test-marketed the Redbox concept in Canada for three years from February 2012 to February 2015 before pulling the plug on its Canadian operation, citing low demand.

In 1946, Clarence Hoogland started Midstates Appliance & Supply Company, a wholesale distribution business, which would eventually lead circuitously to the founding of Glenview, Illinois-based Family Video in 1978. Clarence’s, son, Charlie Hoogland, began to run the company in 1953. It was under Charlie that Midstates Appliance & Supply Company, a distributor for Magnetic Video Corporation, which became the first corporation to release theatrical motion pictures onto Betamax and VHS that year, found itself stuck with a bun of unwanted videos in 1977. After some legal maneuvering, Family Video set up shop to rent the videos out in 1978. Today, Family Video has 777 stores and more than 7,000 employees in 19 U.S. states and Canada. Most are in the U.S. Midwest, with about 80 video stores in Indiana, including eight stores in Indianapolis. Family Video also has nine stores in Canada, all in Ontario and all but one in southwestern Ontario, after expanding into the Canadian market in 2012. There are stores in Burlington, Hamilton, LaSalle, Sarnia, St. Thomas, Tecumseh, Welland, Windsor and Sault Ste. Marie in Northern Ontario. The stores are open seven days per week from 10 a.m. until 11 p.m. American locations are open also from 10 a.m. until 11 p.m. or midnight.

There are more than 30 Family Video stores, with their evergreen-coloured awnings, fronted by tall glass obelisks and a slanted orange logo, in the suburban Chicago area. In 2012, privately owned Family Video, surpassed Blockbuster as the largest movie and game rental chain in the United States.

Family Video owns its own real estate and has shrunk the retail space of its stores from 7,000 square feet to 5,000 square feet in recent years as more compact DVDs replaced bigger video boxes and he stores didn’t need as much space. Legacy Pro is the real estate division of.

In the early 1980s, Legacy Pro began buying old gas stations and converting them to house Family Video stores. Legacy Pro has more than 800 properties across 19 states, primarily in the Midwest. With build-to-suit locations, shopping centers, and pre-existing retail space, it has a diverse collection of tenants from Fortune 500 companies to local community retailers, usually anchored by a Family Video store in high-traffic, high visibility neighborhood locations.

The current company president, Keith Hoogland, grandson of the founder, has headed Family Video since 1994, and told the Indianapolis Star last month, “If you ever go by our stores on a Friday night, at 6:30 or 7, you’re going to see a lot of people in our stores. It’s cranking. And it’s fun.”

He went onto say, “What happened is people stopped thinking it’s cool to go to brick-and-mortar video stores. But the reason they stopped is Blockbuster and Hollywood closed, and Movie Gallery, so there’s this void on the East Coast,” Hoogland said. “We were the third-largest chain and now we’re the largest. If we were all over the country, I think people would still be going to brick-and-mortar stores and renting videos.”

Hoogland argues people never stopped loving the experience of browsing in their neighborhood video store. Most just ran out of options to do that.

With at least 1,500 square feet of excess retail space in many of its stores as DVDs replaced bigger video boxes on the shelf, Hoogland brainstormed about how that space might used in some of the locations. His solution. Teaming up with Marco’s Pizza of Toledo, Ohio. Marco’s Pizza, founded in 1978 by Pasquale “Pat” Giammarco, is one of the fastest-growing pizza franchise operations in the United States. The Toledo-based delivery pizza franchisor opened 116 stores in 2015, and is expecting to open another 150 this year. Pizza is a $46- billion market in the United States that continues to grow at a rate of about one to two per cent per year.

Marco’s Pizza has more than doubled its national footprint since joining forces with Family Video in 2012. It operates now in 29 U.S. states from California to Florida and outside of the United States has locations in the Bahamas and Panama.

In 2014, “the duo experienced phenomenal growth with the opening of 52 locations,” says Bryon Stephens, president and chief operating officer of Marco’s Pizza, which has an order window inside most Family Video locations for easy pizza carryout service. The cut-through window between the two stores let’s the pizza smell waft into the Fmily Video side from the Marco’s Pizza size and perhaps inspire movie video browsers to order a pizza without ever leaving the video aisles.

Delivery customers benefit, too, because Family Video offers delivery of movies with online pizza orders, and people can give their movies to pizza delivery drivers to take back to the store.

As a privately held company,  Family Video doesn’t have to disclose exact numbers, but the company says they opened around 18 video stores in 2012 and more than 10 in 2013. In October 2014, Family Video’s same-store sales rose 4½ per cent over the year before. According to Hoogland, the company’s same-store sales, which indicate that a retailer is growing without opening stores, have gone up in 29 of the past 30 years, with 2004 as the only exception.

IBISWorld estimated in 2013 the average storefront video rental shop has a razor-thin 3½ percent estimated profit margin.

Family Video uses low prices and forgiving late-return policies to build a loyal base of customers who live within three miles of a store.

“In Chicago or New York or LA, we kind of have this assumption that everybody’s using on-demand and iTunes and Netflix,” Russ Crupnick, video industry analyst for Port Washington, New York-based NPD Group Inc., told the Chicago Sun-Times two years ago. “The reality is that the majority of people don’t. I always thought the experience of being in the store, browsing, getting recommendations from a clerk that knew what they were talking about were very valuable experiences. Frankly, I don’t think they’re experiences that digital has replicated quite as well.”

As for the Hooglands, they have always been entrepreneurial, going right back to the beginning in the mid-1940s with Midstates Appliance & Supply Company. As the Chicago Sun-Times noted in its Jan. 17, 2014 story headlined, “If you saw Family Video’s profits, you’d open a video store too” the Hooglands have sold dial-up Internet service, commercial coffee machines, mood rings, 10-foot satellite dishes and microwave popcorn, among other things. The also own a fibre-optic network near Peoria, Illinois and a chain of fitness centres.

“We said, ‘Boy, when the video business ends, if it ever does, what are we going to be left with?’” Hoogland told the Chicago Sun-Times (http://chicago.suntimes.com/news/7/71/790445/if-you-saw-family-videos-profits-youd-open-a-video-store-too). “Let’s say we were leasing a store. We moved the store down to the corner where the gas station was. And guess what happened? Our business went way up.

“McDonald’s flips burgers to buy their properties,” Hoogland says. “We rented movies to buy real estate.”

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