The Rise and Fall of the Retail Video Rental Industry: A Cautionary Tale for the Commercial Cannabis and Non-Industrial Hemp Cannabinoid Industry

The retail video rental industry in America experienced a meteoric rise beginning in the mid 1980s, fueled by the decreasing cost of videocassette recorders (VCRs) and the increasing expense of cinema admissions. Consumers, eager for affordable home entertainment, turned to video rental stores leading to a boom in demand that extended well into the early 2000s. Major retail chains such as Blockbuster, Hollywood Video, Movie Gallery, West Coast Video, and Family Video thrived, alongside retail video rental sections in supermarkets and drugstores. However, the industry’s fortunes began to shift as new technologies emerged and regulatory control was not established and maintained by the industry, eventually leading to the full industry’s demise. The Retail Video Rental Industry grew from $3.5 billion in revenue in 1985, (adjusted for inflation equates to about $9.5 billion in 2024 dollars) to a peak of $9.8 billion in revenue by 1990 (adjusted for inflation equates to about $21.6 billion in 2024 dollars) to a current market size of estimated $641.4 million in 2024. This can happen to the Commercial Cannabis and Non-Industrial Hemp Cannabinoid Industries without foundational change.

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Birth of the Industry (Early 1970’s to 1980s):

Growing up in the 1970s and 1980s, I remember a world before streaming, before the internet, and even before Cable TV. Hell, I remember a time before touch-tone phones, when dialing a number required patience and a rotary dial. Technology was advancing rapidly during this period, and each innovation felt like a monumental leap forward. One of those moments came in 1985 when my grandmother bought our first Video Cassette Recorder (VCR). For a 13-year-old me, it was more than just a new gadget—it was a gateway to a new world of entertainment.

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Before home video, watching a movie outside of a theater required an endless wait. If a film finally made its way to broadcast television, it was a rare event—airing maybe once or twice a year on ABC, CBS, or NBC. If you missed it, you were out of luck until the next cycle. But with a VCR, that dynamic changed overnight. Suddenly, we had the power to record movies when they aired or, even better, rent or buy them from a local electronics store. The ability to see a movie after its theatrical release without waiting for a network to decide when it was "event-worthy" was a game-changer.

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This thrill wasn’t just limited to my household, it was a nationwide phenomenon. Across America, families embraced the newfound freedom that home video provided. Video rental stores became cultural institutions, and movie nights became a cherished tradition. The industry's explosive growth in the 1970s and 1980s was driven by technological advancements, economic shifts, and changing consumer preferences. But more than that, it was fueled by the excitement of people like me—kids, parents, and movie lovers alike—who saw video rentals as more than just a convenience. They were a revolution in how we experienced entertainment.

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Key factors that fueled the birth and rise of the video-rental industry include:?

1.????? Introduction of the VCR (1970s): The development and commercialization of videocassette recorders (VCRs) allowed consumers to watch movies at home, breaking the monopoly of theaters and network television.

2.????? Dramatic Price Drop of VCRs (Late 1970s - Early 1980s): Early VCRs were expensive, but by the early 1980s, prices dropped significantly, making them accessible to middle-class households. More VCRs in homes meant greater demand for rental content.

3.????? Hollywood Embracing the Home Video Market: Initially resistant, Hollywood studios recognized the revenue potential of selling and renting movies on VHS. By the early 1980s, they began distributing films widely for home rental.

4.????? Rising Theatrical Ticket Prices: As the cost of going to the movies increased, consumers sought more affordable entertainment options, making video rentals an attractive alternative.

5.????? Emergence of Independent and Chain Rental Stores: Local mom-and-pop rental stores flourished, while national chains like Blockbuster and Hollywood Video emerged in the mid-to-late 1980s, standardizing the rental experience and expanding availability.

6.????? Limited Early Cable and Pay-TV Options: Before the explosion of premium cable channels and streaming, video rentals provided one of the few ways to watch movies at home outside of scheduled television broadcasts.

7.????? Relaxation of Movie Rental Laws: The 1984 Supreme Court decision in Sony Corp. of America v. Universal City Studios (the “Betamax case”) ruled that home recording of television content was legal, bolstering the legitimacy of home video consumption.

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These factors collectively fueled the rise of the video rental industry, setting the stage for its dominance through the 1980s and into the early 2000s. Here's a linear overview highlighting key statistics at the industry's birth:?

·??????? Number of Retail Stores: In 1983, there were approximately 7,000 video rental stores in the U.S.

·??????? Industry-Wide Revenue: The industry generated around $3.5 billion in revenue in 1985, which adjusting for inflation to 2024 dollars equates to about $9.5 billion in 2024 dollars

·??????? Industry-Wide Employment: Approximately 54,000 individuals were employed in the video rental sector in 1983.

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Peak of the Industry (Late 1990s - Early 2000s):?

The retail video rental industry reached its peak during the 1990s and early 2000s due to a combination of technological advancements, favorable judicial decisions, and aggressive industry expansion strategies. However, its success wasn’t just about business models and infrastructure—it thrived because it became an integral part of everyday life and social experiences. Owning a video rental membership card was more than just a convenience; it was a status symbol. Renting a movie wasn’t just a transaction—it was a ritual. Family movie nights, weekend marathons with friends, or picking the perfect film for a date made video rental stores social and cultural touchpoints.

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For college students in the 1990s, video rentals provided a critical currency of entertainment and connection, especially on campuses without Cable TV in dorms. Recording episodes of popular series or renting entire seasons on VHS tapes meant staying in the loop on must-watch shows before streaming existed. Video rentals also provided flexible job opportunities for young people and retirees alike, offering part-time employment that fit into diverse lifestyles.

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At its peak in 1990, the U.S. had 31,000 video rental stores—nearly three times the number of cannabis dispensaries, provisioning centers, and medical cannabis pharmacies (retail Cannabis outlets in Utah) today. Employment in the industry surged from 54,000 workers in 1983 to a peak of 167,800 in 2000, reflecting not just the robust demand for rentals but also the economic stability that came with it. From high school students earning their first paycheck to senior citizens working part-time for supplemental income, video rental stores were more than a business—they were a community hub built on shared experiences and milestones in people’s lives.

Key factors that fueled the industry’s growth:?

1.????? Widespread VCR and DVD Adoption: By the 1990s, VCR ownership became nearly universal in American households, and the introduction of DVDs in the late 1990s further boosted rentals due to improved picture quality and durability.

2.????? Judicial Protection of Video Rentals: The 1984 Supreme Court decision in Sony Corp. of America v. Universal City Studios (Betamax case) protected home recording, solidifying the legitimacy of video rentals. Additionally, the First Sale Doctrine (recognized in Columbia Pictures Industries, Inc. v. Redd Horne, Inc.) ensured that video rental stores could legally rent out purchased VHS and DVD copies without additional fees to studios.

3.????? Elimination of VHS Price Gouging: In the 1980s, studios priced VHS tapes at around $80 to target commercial buyers, but by the mid-1990s, they adopted a sell-through pricing model, making movies more affordable for consumers and rental stores.

4.????? Blockbuster’s Expansion & Industry Consolidation: Blockbuster, Hollywood Video, and other chains expanded aggressively, providing standardized service, larger selections, and a wider network of stores, reaching 31,000 rental outlets by 1990.

5.????? Rise of Direct-to-Video & Rental-Exclusive Titles: Studios capitalized on rental demand by producing direct-to-video movies, bypassing theatrical releases, and offering rental-exclusive titles, which further drove foot traffic to rental stores.

6.????? Lack of Streaming & Limited On-Demand Alternatives: Cable and satellite on-demand services were still in their infancy, making physical rentals the primary way to watch recent movies at home.

7.????? Regulatory Silence: Unlike emerging industries with shifting regulations, video rentals operated with minimal regulatory and legal barriers, benefiting from predictable market conditions during this period.

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By 2001, rental revenues slightly exceeded box office earnings, marking the peak of the industry before digital streaming and on-demand services led to its decline. The financial success of the industry was remarkable. In 1985, rental revenues reached $3.5 billion, growing to $9.8 billion by 1990, which adjusting for inflation to 2024 dollars equates to about $21.6 billion in 2024 dollars. By 2001, rental revenues slightly exceeded box office earnings, demonstrating the dominance of home entertainment. That year, industry sales totaled approximately $8.4 billion and employment in the industry rose to 167,800 by the year 2000.

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The fall of the Industry (the 2000’s to 2024):

The decline of the retail video rental industry from its peak in the early 2000s to its near extinction by 2024 was driven by technological disruption, shifting consumer habits, and regulatory inaction. But it wasn’t just an industry that changed, life itself was evolving, both on a societal level and in my personal world.

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As video rental stores began their slow march toward irrelevance, I was experiencing my own major life transitions. Parenthood and divorce reshaped my priorities, forcing me to reevaluate how I spent both my time and money. Renting movies, once a simple joy and a regular part of my life, became less important as I focused on raising my child as a single father. Internal, self-contained entertainment—things that required less effort, less coordination, and fewer trips outside the home—became far more practical. A rambunctious elementary-age child made video rentals feel almost obsolete compared to the ease of satellite TV, online streaming, and increasingly reliable wireless internet.

Even the way I socialized changed. During my son’s time with his mother, dating practices shifted. The classic "rent a movie and stay in" date night gave way to more active, social experiences. DVD rentals still had some appeal, but as streaming services became dominant and on-demand movies expanded through DVR and direct-to-satellite platforms, the need to visit a brick-and-mortar store simply disappeared.

On a larger scale, the rapid adoption of DVDs in the early 2000s was the first major blow to the retail video rental business, cutting into VHS rentals and shortening the industry’s shelf life. But the real death knell came with the rise of digital streaming. The convenience and affordability of services like Netflix, Redbox, and later, Hulu and Amazon Prime Video, fundamentally changed how we consumed entertainment. The ritual of walking through a video store, reading the back of a VHS or DVD case, and debating movie choices with friends or family was replaced by a few clicks on a remote. The shift was gradual at first, but by the time it became clear that video rental stores were in trouble, the consumer base, myself included, had already moved on. Over the past two decades, the industry has experienced a dramatic decline. By 2023, only 554 DVD, game, and video rental businesses remained, with estimated revenue of just $641.4 million in 2024. As of 2024, the number of DVD, game, and video rental businesses has declined to an estimated 476, reflecting a decrease of 14.1% from 2023 when by contrast, in 2000, there were nearly 28,000 stores actively renting videos in the U.S.

Key factors contributing to its fall include:

Decline and Fall (Mid-2000s to 2024)

1.????? Rise of Digital Streaming & On-Demand Services:

o?? Netflix's DVD-by-mail service (launched in 1998) gained traction in the early 2000s, reducing the need for physical rental stores.

o?? The 2007 launch of Netflix’s streaming service, followed by competitors like Hulu (2008), Amazon Prime Video (2011), and Disney+ (2019), further eroded demand for physical rentals.

2.????? Bankruptcies & Mass Closures:

o?? Blockbuster filed for bankruptcy in 2010 after failing to adapt to streaming. Hollywood Video and Movie Gallery shut down in 2010. By 2023, fewer than 600 rental stores remained in operation.

3.????? Judicial & Regulatory Actions Impacting the Industry:

o?? Kirtsaeng v. John Wiley & Sons, Inc. (2013) reaffirmed the First Sale Doctrine, allowing video rental businesses to continue renting legally purchased DVDs, but by this time, demand had already plummeted.

o?? The 2015 FCC Net Neutrality ruling (later repealed and reinstated) indirectly favored streaming companies by preventing ISPs from throttling their services.

o?? No significant federal legislation was enacted to protect or revitalize the physical rental industry as digital media took over.

4.????? Piracy & Digital Competition:

o?? Illegal streaming and torrent sites provided free alternatives to rentals, significantly cutting into industry revenues.

5.????? Failure to Innovate & Adapt:

o?? Redbox slowed the decline with its low-cost DVD rental kiosks, but it failed to transition successfully to a digital model, leading to financial struggles.

o?? Blockbuster’s late attempt at a streaming service in 2011 failed against Netflix’s dominance.

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Could the video rental industry have saved itself?

You might be asking yourself: How could a multi-billion-dollar industry—supported by a robust and diverse supply chain of critical inputs, from movie studios and distributors to POS software providers, store maintenance services, snack and beverage vendors, and merchandise suppliers—collapse into near extinction? More importantly, why does this matter for the Cannabis and Non-Industrial Hemp Cannabinoid industries?

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Both industries experienced explosive growth, fueled by accidental regulatory support, rapid customer adoption, and deep integration into everyday lifestyles. Yet, neither achieved regulatory capture—the ability to shape and solidify Federal and State statutory and administrative laws to protect their market position against evolving technologies and competitive pressures. Without this safeguard, industries remain vulnerable to disruption, and in the case of video rental, failure to secure long-term regulatory stability ultimately led to its demise.

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So, could the video rental industry have reversed its decline and near-death situation? Would direct engagement with the regulatory and legislative sectors have helped protect its survival? The answer is a resounding yes. Every industry benefits from sustained, strategic governmental engagement. The video rental industry could have secured regulatory advantages much like a sick patient benefits from doctors and medicine—by recognizing the symptoms of decline early and acting decisively. But without this intervention, the industry was left defenseless against technological disruption, shifting consumer habits, and regulatory inertia. The lesson here is clear: without an active role in shaping the rules of the game, even the most successful industries can find themselves obsolete. Here’s a few regulatory & statutory actions that could have slowed or reversed decline of the retail video rental industry:

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1.????? Industry-Backed Copyright Reforms:

o?? Push for stricter enforcement against digital piracy, ensuring a level playing field for physical rental businesses.

o?? Advocate for a content “rental window,” statutory law requiring new films to be available in physical rental stores before streaming services.

2.????? Federal Incentives for Physical Media Retailers:

o?? Tax incentives or grants to small businesses maintaining physical rental stores as part of cultural preservation.

o?? Subsidies or tax breaks for physical rental businesses investing in hybrid rental-streaming models.

3.????? Net Neutrality & Competitive Regulation:

o?? Advocate for regulatory measures to prevent ISPs from favoring streaming services with faster speeds while limiting access to physical rental businesses that might have built streaming alternatives.

4.????? Consumer Protection Measures:

o?? Legislation requiring digital media platforms to offer non-subscription-based rental options at competitive prices, ensuring fair competition with physical rental businesses.

5.????? Encouraging Community-Based Rental Models:

o?? Federal or state funding for public libraries and independent retailers to maintain movie rental collections as cultural and educational resources.

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While these measures might have slowed the industry’s decline, the convenience of digital streaming made the downfall of video rental stores nearly inevitable. The video rental industry’s failure to anticipate and adapt to digital transformation ultimately sealed its fate.

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Parallels with the Commercial Cannabis and Non-Industrial Hemp Cannabinoid Industry

So why have we looked at the birth, growth, decline and near-death of the retail video rental industry and what does it have to do with the Commercial Cannabis and Non-Industrial Hemp Cannabinoid industries? Well to quote the scholar and noted conservationist Thanos of Titan say, when his adopted daughter Gamora asked him in the Soul Stone realm about the cost for using the Infinity Gauntlet? Everything. The trajectory of the video rental industry serves as a potential precursor for the commercial cannabis and Non-Industrial Hemp Cannabinoid market. Several key parallels suggest that while the cannabis sector is experiencing rapid growth, it must also prepare for inevitable industry shifts and market challenges:

1.????? Explosive Initial Growth: Just as video rentals surged in response to a new consumer-driven market, the cannabis and CBD industries have experienced rapid expansion following legalization and increased public acceptance. The emergence of dispensaries, wellness-focused CBD products, and recreational cannabis markets has created a booming industry.

2.????? Regulatory Uncertainty: The video rental industry initially thrived in a regulatory gray area, with studios and distributors struggling to adapt to the new rental model. Similarly, the cannabis and CBD/hemp industry faces ongoing regulatory uncertainty, including federal restrictions, state-level inconsistencies, and evolving compliance requirements.

3.????? Shifting Consumer Behavior & Technology Disruptions: Streaming technology disrupted video rentals, making physical stores obsolete. The cannabis sector could face similar upheavals from alternative product delivery methods, synthetic cannabinoids, or pharmaceutical-grade cannabis substitutes that challenge traditional dispensary-based models.

4.????? Market Saturation & Competition: The video rental industry eventually became saturated, leading to fierce competition, price wars, and declining profitability. The cannabis market faces similar risks as more companies enter the space, potentially driving down prices and creating unsustainable business models.

5.????? Corporate Consolidation & Industry Evolution: Major chains like Blockbuster attempted to evolve but failed to adapt quickly enough. The cannabis and CBD industry must remain agile, with companies focusing on diversification, technology integration, and consumer convenience to avoid a similar fate.

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Key Takeaways for the Cannabis & CBD Industry

To avoid repeating the fate of video rentals, the cannabis and CBD industry should consider:

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·??????? Engaging in pro-active political electioneering: Taking a more active and visible role in the election of Pro-Cannabis and Hemp Congressional, Presidential, Legislative and State Executive branch officials.

·??????? Increasing Lobbying and Advocating for Stable Regulations: Engaging in policy discussions to create a favorable and predictable regulatory environment.

·??????? Embracing Innovation: Investing in technology, online sales, and direct-to-consumer delivery models to future-proof businesses.

·??????? Adapting to Consumer Preferences: Monitoring trends in product formats (e.g., edibles, beverages, pharmaceuticals) and shifting towards demand-driven offerings.

·??????? Strategic Expansion & Differentiation: Focusing on brand development, niche markets, and unique value propositions to stand out in a crowded field.

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The rise and fall of the video rental industry offers a cautionary tale for cannabis entrepreneurs. By learning from the past, the cannabis and CBD/hemp industry can avoid obsolescence and instead forge a sustainable, long-term future.

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