There May Be Life In Those Old Products Yet!
John FahySo Xtra-vision finally succumbed to the harsh realities of life in the DVD rental business with the closure of its operations in Ireland last week and the loss of 580 jobs. But perhaps the most interesting aspect of this event was that it took so long to come to pass. Video/DVD rental has been on life support for over two decades now and twenty years is a long time in any business.
Xtra-vision was a company with a chequered history. Founded by an ex-courier, Richard Murphy, the fledgling company opened its first store in 1980. Murphy had a flair for doing things differently and with a team of attractive young ladies in short skirts getting the publicity, he quickly grew the business which went public in 1989 and saw its share price quickly double. At the peak of its powers, the company had 317 stores in Ireland, the UK and the US. But when it became apparent that the shelf life of a video was much less than the estimated 30 months, sentiment toward Xtra-vision quickly changed and its stock fell like a stone. The company changed hands several times throughout the next two decades, even surviving examinership in 2011 before finally succumbing to the inevitable last week.
In spite of its roller coaster ride and the obvious challenges to its business model, Xtra-vision was still generating a very respectable sales volume of €85m in 2012, half of it coming from movie rental and sales and half from games and music. It even managed to outlive a much more efficiently run (and one-time owner) global video rental company – Blockbuster which collapsed in 2010. Its survival was no doubt helped by the slow pace of making the prospect of video on demand over the Internet a reality – it was 2007 before Netflix began to offer this service. So even in declining industries, returns can be healthy and persist for many years. But when the inevitable death comes it is usually swift. Xtra-vision sales fell to €38.5m last year and there was no coming back from that.
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