That Reel Video has become a treasured community institution in Berkeley is an accident of timing and strategy.
Beloved by local cinephiles and neighborhood residents alike, the 8,000-square foot video store is actually a relic of the dot-com bubble that developed a devoted following among people who love to browse its extensive collection of titles that range from the biggest hits to the most obscure cult films. While I’m well aware that the trend of renting DVDs online is undermining the local video store, I was still surprised to learn a couple weeks ago that Reel was on the verge of being closed. There is such passion around the store still, I figured it might be the exception.
In fact, Reel is still profitable, but it’s caught on the wrong side of a corporate bankruptcy. Back in February, Movie Gallery, which owns the Hollywood Video franchise of rental stores, filed for bankruptcy and said it planned to close and liquidate most of its stores. Most folks, including me, didn’t realize that Movie Gallery owned the Reel Video store. Indeed, word that the store is in peril is only just trickling out to the store’s staff and the community.
But behind the scenes, Reel’s founder Stuart Skorman has been leading efforts to save the store. He wants to preserve what has become an unlikely cultural touchstone while also exploring how such a place might be transformed to remain socially and economically relevant as its old business model inevitably whithers away.
Beyond the sentimentality, this effort raises two interesting questions. Can Reel be saved? And even if it can, should it be saved? Whatever fixes can be made in the short term, the trendline in clear. Renting videos from stores is a dying habit. Wouldn’t Skorman just be postponing the inevitable?
Of course, Skorman thinks not. He’s convinced that if he saves the store now, it will buy him some time to reinvent the store’s role in the video marketplace and the community.
“The reason I’m involved is community,” Skorman said. “It’s an important part of a community, and it’s worth saving therefore. It’s so sad if it goes away for so many people. But long term, maybe something more can be made of it.”
Am I killing Reel?
I live in North Oakland, and the change in my own video renting habits mirror the larger forces bearing down on Reel. When I first moved here back in January 2001, everyone made a point to tell us about Reel. It was the place to rent a video in North Oakland and South Berkeley. Forget the ample number of Blockbusters and Hollywood Video stores nearby.
My family became Reel regulars. I still have my Reel video rental card on my keychain. But my loyalty changed after subscribing to Netflix. I love Netflix, and became an evangelist to all my friends. Then we expanded to downloading videos from iTunes, streaming them online, and of course watching OnDemand from Comcast.
This trend has accelerated the past couple of years. According to NPD, a consumer research services based in Chicago, the percentage of individual DVDs rented from a store has dropped from 64 percent in 2007 to 37 percent the first quarter of 2010. People are moving to a subscription model, from both stores and online., with this category now accounting for 37 percent of rentals. It’s hard to count pure online rentals because places like Blockbluster offer hybrid models, one price for online and store subscriptions.
And yet, I still make the occassional trip to Reel. Sometimes the kids just need something right now. Or the set of videos we have on tap from Netflix are not right. A trip to Reel can still sometimes be faster — and cheaper — than using Comcast’s horribly designed OnDemand menus. And sometimes, I just plain like the feel of being in a place surrounded by walls of DVDs.
So I was stunned while attending a neighborhood barbecue recently when the chatter turned to the impending closing of Reel.
“No!” I said. “How have I not heard about this?”
It turns out, I wasn’t the only one in the dark.
The accidental success
Skorman came to the Bay Area with a background in video rental stores. He’d started a small, local chain of them in Vermont, which he sold and moved West.
When he discovered the Internet, he started building a site to sell and rent movies. Reel.com was launched. But here’s the forgotten twist:
Skorman said when the site launched in 1996, he figured no one would make money on the Internet. Instead, he thought the site would be a marketing vehicle for bricks-and-mortar stores. He would build a new chain of retail stores in tandem with the Web site.
He put the first one in South Berkeley. It was a town he figured he knew well because of its similarities to Burlington, Vt., where he’d operated another store. Super Liberal college towns both. And he found the perfect spot in South Berkeley. There was a spot along Shattuck Avenue where neighbors were fighting the decision to build a Hollywood Video because they didn’t want a chain store. Skorman offered to take the property off Hollywood Video’s hands and build a truly local video story, making him a neighborhood hero.
The store he built there was tailor made for Berkeley. It stocked more than 25,000 titles, about three times as much as the average chain store. And they were organized along all sorts of categories like “Action” to sections devoted to one director or actor. It catered to the obsessive fan. And of course, it had loads of cult movies you couldn’t find anywhere else.
Of course, just as the store got running, dot-com mania took over. Investors told Skorman to stop building stores and focus on the Web site. Smart move. Two years later, he sold Reel.com to Hollywood Video for $100 million in an all-stock deal. By the way, it wasn’t so good for Hollywood, which just two years later shut down the site and fired the whole staff.
At the time, the sale enraged local residents who had fought the Hollywood Video store. They saw Skorman as a traitor. But Skorman says he had a handshake agreement with Hollywood’s CEO that the Reel store wouldn’t be touched. True or not, the store has been allowed to operate as it was intended without being forced to endure a chain-style makeover. That remained true even after Hollywood was later acquired by Movie Gallery.
By operating as the anti-chain store within a chain store, Reel has remained profitable. A lesson that appeared to go unlearned as the larger chain sunk into the red, bankruptcy, and now liquidation.
I talked recently with Richard Phillips, a shift leader at Reel, who has worked there for five years. We talked about what males Reel special and different. He agreed about some of the big things, like the selection and the various ways movies are categories. That has attracted customers like Pixar Studios, which has a special account at Reel. When the studio is considering using a vocal talent for one of its productions, it likes to come into the store and rent all of that person’s movies, Phillips said.
Phillips also noted that many of the 14 staffers at Reel have worked there for a long time, and that they love it. That enjoyment shows up in little ways, like the oddball choices for videos that play in the store. Or their surprising knowledge of movies and ability to talk to customers about the subject endlessly.
“We all really love movies,” he said. “It’s a differnet kind of store than any kind of chain store you go to.”
And they’ve stuck around despite all the financial uncertainty. But Phillips said even the staff was caught off guard by news of the store’s closing. Back when Movie Gallery filed for bankruptcy in February, the thought was that only some stores would be liquidated. But in early May, the staff learned that Reel was scheduled to be shut down. That news is just now trickling out to the community.
I called the press hotline for Movie Gallery, by the way. It contains a pleasant message saying to read the legal documents on the company’s Web site about the bankruptcy. And if no one calls back, just write that officials couldn’t be reached for comment.
Officials couldn’t be reached for comment.
Skorman to the rescue?
The news of Reel’s dilemma reached Skorman a few weeks ago. Skorman was still nursing his wounds from the closing last year of Elephant Pharmacy, a chain of local pharmacies he’d started in the Bay Area to try an provide an alternative setting to take on the big pharmacy chains.
Skorman started trying to figure out scnenarios to raise the money to buy Rell back from Hollywood/Movie Gallery. So far, no luck. At one point, he thought he had investors, but the deal fell apart. So he decided to make his efforts public in the hope of attracting other interested parties.
Beyond the sentimental reasons, Skorman thinks there’s a real opportunity to take what exists and reinvent it, rather than just shut it down and sell the parts.
Skorman’s plan in the short term is to expand the store’s business to include trading DVD and selling used DVDs. Swapping and used DVDs are growing businesses, and he said Reel would be in a good position to get into this game because of its reputation as a place for cinema lovers and its strong customer base.
Longer term is less clear, but Skorman figures this shift to a new business model could buy him some time to figure that out. Could it evolve to include educational functions about movie history? Could it be a gathering place for community members to meet and discuss movies? Who knows? But Skorman thinks it’s worth it to try.
None of this sounds quixotic to me. For all the wonders of the Internet, we still have a fundamental need and desire to connect and shop in the real world. That habit has persisted much more strongly than many people assumed a decade ago when digital utopians mocked stores that clung to their bricks and mortar operations as dinosaurs.
And even today, when digital streaming is finally becoming a reasonable option thanks to faster broadband connections, we are seeing an interesting trend that provides a counterpoint to the growth of Netflix’s online rental and streaming of movies. Upstart Redbox has also enjoyed explosive growth by rolling out thousands of signature red kiosks at grocery and convenience stores, a reminder that many other people still prefer renting a physical DVD to watch their movies. Indeed, according to NPD, the kiosk trend is proving to be even more disruptive than the Internet. The percentage of DVDs being rented from kiosks has risen from 3 percent in 2007 to 27 percent during the first three months of 2010.
The other reason some of this seems doable is the price tag. Skorman said he needs to raise about $250,000 to buy the store, invest in some long overdue upgrades to its systems, and start the used DVD business. That seems like a relatively small risk.
Looming over all of this is the question of time. Neither Skorman nor the store employees have been able to learn when the store is scheduled to be closed. It could be tomorrow. It could be several weeks.
I’ve got my fingers crossed for him. But the community’s love for the store is no longer enough. What happens to Reel over the next couple of weeks will tell us just how far residents of this fiercely independent town are willing to go to prove they really want to champion local ownership over big chains.