Gotta have the DVD of your favorite movie the weekend it’s released? No problem, it will be available at your local Circuit City, Best Buy or Wal-Mart for $25 or less.

In 1990, it didn’t work like that. Newly released videos were a breathtaking $65-70.

At the time, Hollywood distributed its videos to wholesalers first, who in turn sold them through to local video stores at top dollar prices. Several months later, the same movie titles were released into retail stores and were available for $20-25 - about what you pay for them today.

There were some exceptions. For instance, kids’ movies were inexpensive. Additionally, the movie studios occasionally released a film simultaneously to both video stores and the general public. Pretty Woman was an example of this anomaly, and at less than $20 a copy, it provided us with a welcomed breath of financial relief.

Every week, two to four new movies were released, and we religiously shelled out hundreds of dollars to buy 2 or 3 copies of each.

Even with the flexibility provided by brokers to sell back copies of new releases, the economic reality was we just didn’t have the cash to buy enough stock to meet the first flurry of demand. The decision to deal with disgruntled customers rather than buying more copies of new releases was an easy one to make. Demand for the new titles slipped sharply after the first couple of weeks and we weren’t sure we’d breakeven on additional copies. At our rental fee of $2.99 per night, we needed to rent new releases 15 times, or basically 4 days per week in 28 days. Videos we kept would need to be rented 24 times to pay for themselves.

Very quickly, we were feeling milked dry by our “cash cow.”

When we complained, our brokers told us that we should think of the new releases as loss leaders, and that most independent video store profits were generated by renting older titles and, more significantly, adult movies. This information was interesting, but disheartening. We didn’t rent adult titles. How could we? After all, how would the neighbors react to our wholesome, 1950s neighborhood ice cream parlor being a porn den?

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