Movie Gallery will soon be out of the picture. Three months after filing for bankruptcy, the chain will begin liquidating the balance of its stores in the coming weeks, according to The Wall Street Journal.
Movie Gallery seemed on top of the world a few years ago. It acquired the Hollywood Video chain, and its rural emphasis seemed to buffer it from the metropolitan pressures squeezing Blockbuster
However, the challenge of charging full-price rentals for optical discs in a changing industry proved too much for the company to handle.
Naturally, the patrons of Movie Gallery's 2,415 stores aren't about to go cold turkey on movies. They will turn to rival outlets for their flick fixes, which explains why Blockbuster, Coinstar, and Netflix all rose yesterday. Digital-delivery specialist Apple
Then again, Movie Gallery customers probably won't rush to pay up for piecemeal downloads. Pay-per-view movies through their cable or satellite television providers will be the more logical beneficiaries -- so again, it's no surprise that Comcast
Just as Circuit City's liquidation created opportunities for rival consumer electronics chains, Movie Gallery's departure will be a near-term feast for its rivals. Record box office receipts for exhibitors last year also bode well for this year's DVD releases.
Investors shouldn't get overly comfortable here. Blockbuster still has financial hurdles to overcome. Redbox is hogtied to the fading optical disc. Netflix is doing well in its streaming diversification, but it's trading at a lofty markup, given the sector's uncertain future.
Opportunity may be knocking with Movie Gallery's demise, but the door is creaky.
Longtime Fool contributor Rick Munarriz can't remember the last time he went into a video store for a rental. He does not own shares in any of the stocks mentioned in this story, except for Netflix. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.