MEXICO CITY (Reuters) — A battle is brewing for Mexico’s booming video rental market as U.S. marauder Blockbuster Entertainment Corp. tries to move in on entrenched local power Grupo Video Visa.
Blockbuster is mounting an aggressive expansion campaign less than two years after opening its first store south of the border, director Juan Jaime Petersen told Reuters in an interview.
And Video Visa, in the throes of an ownership changeover, is fighting back with its own efficiency and expansion campaign.
“My plan calls for 94 stores by the end of this year,” Petersen said. “We have 56 as of the end of July. … The whole plan is to have around 280 (in about five years), perhaps a growth of around 52 or 56 stores a year.”
He said Blockbuster, which opened its first store in the low-income Izcalli district of Mexico City in September 1991, was seeking to provide customers with something often lacking throughout the Mexican tertiary sector: quality service.
“Mexicans are not used to being served,” said Peterson, who is Mexican. “But once they are served, it’s the most demanding market you’ll see in your life.”
Accurate figures about the size of the Mexican video market are hard to come by.
Deep TV penetration
Petersen said about 90% of Mexican urban households have TV sets, and of those about 45% have a videocassette player.
Leonides Guadarrama, director of publicity at Video Visa, said 98% of Mexican households have televisions and 38% have vid players.
Both said the market was expected to grow a great deal.
“The potential is for more than double” the current figure of vid players, Guadarrama said.
Video Visa, formerly the video rental and distribution unit of Mexican media giant Televisa, changed ownership this month.
Controlling shareholders, led by Televisa owner Emilio Azcarraga sold their 60.5% stake of Video Visa to a private investor group led by Eduardo Legorretta, a former chairman of brokerage Operadora de Bolsa, for $ 151.6 million.
Video Visa on Aug. 4 reported 1993 second-quarter earnings of $ 4.37 million, down from $ 5.67 million in the same quarter in 1992.
Guadarrama said Video Visa, too, has expansion plans. Of its current 1,800 stores, many of them run by franchise-holders, “We are closing the small, inefficient ones,” he said. “The strategy is to grow with efficiency.”
Big expansion plans
The company’s goal is to expand to 4,000 stores, many of them Blockbuster-scale large stores known as Macro Videocentros. The group plans 200 such stores by the end of 1994, up from around 80 now.
Guadarrama said Video Visa currently has 54% of the video rental market and 20% of the local stores.
Many video stores are small “mom and pop” concerns that he said would increasingly be squeezed out of business.
Guadarrama said Blockbuster had about 10% of the video rental market. Petersen declined to give a figure.
Guadarrama added that Blockbuster’s arrival on the scene would also boost Video Visa’s distribution operations: Video Visa owns exclusive rights for Mexico to films from most major U.S. studios and rents them out through Blockbuster as well as its own outlets.