Few decades ago video rental stores were good business. There were many video rental companies who distributed videos for rental with different types of movies, and in different qualities.
The big discussion in those days was related to quality. And the big issue was whether the very popular Video Home System (VHS) would be the surviving winner of the quality combat against the Betamax system, which was praised by many experts as being much better than the VHS. Some experts claimed that Betamax would leave VHS in the dark, regardless of how popular the VHS was.
However, in the end, both of the two systems, the VHS and the Betamax, became the losers, and it is not unusual to see Betamax and VHS cassettes ending up as garbage on their way to the dump yard.
But this doesn't mean that the video rental companies have gone into bankruptcy. What happened was that they continued to rent out movies, only now the media has changed. Instead of Betamax and VHS tapes, they now rent out DVDs. And new movies are only distributed on DVDs (Even private people transferred their home videos and began to convert video tapes to DVD)
The movie rental business expanded even more after the introduction of the DVDs. Only those privately owned video rental stores, which were owned by small business enterprises had survival problems, in particular those video rental stores who had invested in own large stocks of the now outdated media, the video tapes! (and it didn't matter whether it was VHS or Betamax).
The big question is now. Will the same fate repeat itself? Will the DVDs be replaced by a new and more advanced media? Well, it is hard to say. There is a new player on the movie rental market: The Blu-Ray! Blu-Ray has a much higher quality than the DVDs, with the movies in a much higher resolution, resulting in images and colors of a very high quality; and even the sound track produces much better sound and music.
Personally I do not believe that the Blu-Ray discs are as big a threat to the DVDs as the DVDs were to the tapes which were based on the VHS and the Betamax system, because there are simply too many DVD players around. The threat to the video rental companies and the video rental stores might, however, come from somewhere else than a new physical media technology. - The Internet is most likely the biggest threat to the physical video rental store.
More and more people rent or buy their movies on DVDs and Blu-Ray over the Internet. And many of the buyers do not even get a physical disc, but download the movie direct to their own hard disc. I see this tendency as a much harder competition to to the video rental stores, whereas it might be easier for the video rental companies to adapt to this new competition.
The big video rental companies will begin to distribute movies on physical DVDs and Blu-Ray discs, or download movies directly to the private consumer, and leave the rental stores in the dark.
So what can the physical video rental stores do? Well, they have to make the private consumer come to the store in order to get other things associated with watching movies at home. One way is to sell snacks, candies, soft drinks, etc., but the creative store owner might get even more effective ideas than mine.
Old video tapes http://upload.wikimedia.org/wikipedia/commons/c/c2/Fate_of_videotape_ubt.JPG