For decades, Friday night in America meant one thing: a trip to the video store. It was a cultural ritual—wandering the aisles of a Blockbuster or a local mom-and-pop shop, arguing over which new release to get, and grabbing a box of Sno-Caps at the checkout. The movie rental industry didn’t just distribute entertainment; it defined how we consumed it. It turned movies from a theater-only experience into a private, controllable event in our living rooms.

However, the rise and fall of this industry is a story filled with corporate warfare, surprising origins, and technological gambles that changed the world. We tend to remember the blue-and-yellow signs and the “Be Kind, Rewind” stickers, but few people know that the industry was actually kickstarted by a fast-food giant, or that the biggest rental chain in history made most of its money from your mistakes. The transition from VHS to DVD to streaming wasn’t a natural evolution; it was a series of calculated moves and happy accidents that toppled empires.

Whether you are nostalgic for the smell of plastic cases or just curious about the business decisions that birthed Netflix, these secrets offer a behind-the-scenes look at a vanished era.

Here are 10 interesting facts you didn’t know about the movie rental industry.

1. The First Video Store Was an Illegal Gamble

How one man’s loophole created a multi-billion dollar industry. Before 1977, you couldn’t rent a movie. Hollywood studios sold videotapes to consumers, but they cost around $80 each (roughly $350 today), making them luxury items for the wealthy. The studios believed that if they allowed rentals, no one would ever buy a movie ticket again. Enter George Atkinson, a businessman from Los Angeles who saw a loophole in the “First Sale Doctrine” of US copyright law. This law stated that once you bought a piece of copyrighted media, you had the right to do whatever you wanted with that specific copy—including lending it out.

In December 1977, Atkinson bought one Beta and one VHS copy of all 50 titles available from 20th Century Fox (including hits like MASH* and The Sound of Music) and opened “Video Station” in a tiny storefront on Wilshire Boulevard. He charged $50 for an annual membership and $10 per rental. The studios were furious and threatened to sue, but Atkinson’s interpretation of the law held up. His gamble sparked a gold rush; within a few years, thousands of copycat stores had opened across the country, forcing Hollywood to eventually stop fighting the rental model and start profiting from it.

2. Blockbuster Made $800 Million a Year from Late Fees

The business model that eventually killed the business. In the early 2000s, Blockbuster Video was a juggernaut with over 9,000 stores worldwide. While they made money from rentals and popcorn, a staggering portion of their profit came from penalizing their own customers. In 2000 alone, the company collected approximately $800 million in late fees. This accounted for roughly 16% of their total revenue—a massive chunk of change derived entirely from customer forgetfulness.

This reliance on “punishment profit” became the company’s Achilles’ heel. It created a hostile relationship with customers, who dreaded the “walk of shame” to the counter to pay a $40 fine for keeping Austin Powers too long. It was this exact frustration that motivated Reed Hastings to found Netflix (more on that below). When Blockbuster finally tried to eliminate late fees in 2005 to compete with Netflix, the loss of revenue was so severe that it crippled their bottom line, accelerating their slide into bankruptcy. They had become so addicted to the fees that they literally couldn’t afford to be nice to their customers.

3. McDonald’s Originally Founded Redbox

Would you like a DVD with that Big Mac? Redbox, the company known for its ubiquitous red DVD rental kiosks, is often thought of as a standalone tech disruptor. In reality, it began as an internal experiment by McDonald’s. In 2002, the fast-food giant was looking for ways to drive more foot traffic into its restaurants. They launched a project called “Touch” (later renamed Redbox) to test vending machines that sold everything from milk and eggs to toilet paper and DVDs.

After realizing that the fresh food spoiled and the toilet paper was too bulky, they pivoted exclusively to DVDs. The idea was simple: rent a movie for $1 while you grab dinner. It was a massive success, solving the “convenience” problem that traditional video stores faced. McDonald’s eventually sold the company to Coinstar (the coin-counting machine company) in 2009 as they refocused on food, but for nearly a decade, the golden arches were the secret power behind the red box.

4. The “Be Kind, Rewind” Slogan Was About Money, Not Manners

A polite phrase that saved stores millions in labor. The phrase “Be Kind, Rewind” is perhaps the most enduring cultural artifact of the VHS era. It appeared on stickers, posters, and membership cards in every video store in America. While it seemed like a plea for courtesy, it was actually a desperate economic necessity for store owners.

Rewinding a tape takes about 3 to 5 minutes. In a busy store processing hundreds of returns a day, employees would have to spend hours doing nothing but standing in front of rewinding machines if customers returned tapes at the end of the movie. This created a bottleneck and increased labor costs. To combat this, stores introduced “rewind fees,” typically charging $1.00 or more if a tape wasn’t fully rewound. The catchy slogan was invented to gently bully customers into doing the labor themselves so stores didn’t have to hire an extra person just to press a button.

5. Netflix Was Founded Because of Apollo 13

A $40 mistake that changed the entertainment world. The origin story of Netflix is legendary in Silicon Valley. Founder Reed Hastings claims the idea came to him in 1997 after he rented the movie Apollo 13 from his local Blockbuster. He misplaced the cassette and didn’t return it until weeks later, racking up a $40 late fee. He was so embarrassed to tell his wife about the fine that he began wondering if there was a better way to rent movies.

Hastings teamed up with Marc Randolph to create a service that had no due dates and no late fees, initially mailing DVDs to customers in distinctive red envelopes. While some business historians argue the story is slightly exaggerated for marketing purposes, the core truth remains: the entire streaming revolution was sparked by the consumer rage associated with the traditional rental model’s punitive fee structure.

6. The “Porn Chose VHS” Theory is (Mostly) a Myth

Size mattered more than content. A common urban legend states that VHS won the “format war” against Sony’s Betamax because the adult film industry chose VHS. The logic goes that pornography drives technology adoption, and since Sony refused to allow porn on Betamax, VHS won by default. While it is true that Sony was more restrictive, the adult industry actually supported both formats for years.

The real reason VHS won was far more practical: recording time. The original Betamax tapes could only record for 60 minutes. This was a fatal flaw for American consumers who wanted to record entire football games or feature-length movies broadcast on TV. JVC, the creator of VHS, introduced a tape that could record for 2 hours (and later 4 hours), allowing users to fit a whole movie or Super Bowl game on a single cassette. By the time Sony increased Betamax’s capacity, VHS had already captured the market. The ability to “time-shift” TV shows was the killer app, not the adult content.

7. The Iconic “Blockbuster Smell” Was a Chemical Cocktail

Why nostalgia smells like ozone and carpet. If you walked into a Blockbuster in 1995, you were hit with a very specific, recognizable scent. It was so distinct that companies today actually sell “Video Store” scented candles. But what was that smell? It wasn’t an intentional branding choice like Abercrombie & Fitch’s cologne; it was an accidental chemical cocktail.

The scent was a combination of three things: the ozone generated by the static electricity of hot electronics (dozens of TVs and VCRs running constantly), the off-gassing of the cheap industrial carpet used in every store, and the artificial butter flavoring from the popcorn stand near the register. Combined with the plastic from thousands of PVC cases, it created a unique olfactory signature that triggered a Pavlovian response in millions of customers, signaling that the weekend had officially begun.

8. “The Young Teacher” Was the First Movie on VHS

An obscure Korean drama started it all. When we think of the first movies on home video, we might guess Star Wars or The Godfather. However, the very first film to be commercially released on the VHS format was a South Korean drama titled The Young Teacher, released in 1976.

When JVC launched the first VHS players in Japan and Korea, they needed content to demonstrate the machine’s capabilities. They didn’t have the rights to major Hollywood blockbusters yet, so they released local films. The Young Teacher has the distinction of being the inaugural title. In the United States, the first wave of titles (released by Magnetic Video in 1977) included classics like The Sound of Music and Patton, but the obscure Korean drama beat them to the punch globally, holding a unique place in the history of physical media.

9. Cartrivision: The Rental Format That Failed Before VHS

The 1972 invention that was too early for its time. Years before VHS or Beta, there was Cartrivision. Launched in 1972, this massive console combined a TV and a video player into one unit. It was the first format to offer feature films for rent, including titles like Dr. Strangelove and High Noon.

The rental system was bizarrely strict. You couldn’t just take the tape home and keep it. The cartridges were black (unlike the red ones for sale) and could not be rewound by the consumer. You would rent the movie, watch it once, and then the machine would lock the spool. You had to return the un-rewound cartridge to the store, where they used a special machine to rewind it and unlock it for the next customer. The system was expensive, the console was huge, and the inability to re-watch scenes frustrated users. Cartrivision went bankrupt in just over a year, serving as a cautionary tale for the industry that followed.

10. There is Only One Blockbuster Left on Earth

The last outpost in Bend, Oregon. At its peak in 2004, Blockbuster had 9,094 stores. Today, there is exactly one. Located in Bend, Oregon, this franchise outlasted the corporate bankruptcy and every other location on the planet. It has become a tourist destination, selling merchandise and even operating as an Airbnb for 90s-themed sleepovers for a brief period.

The store survives thanks to a unique combination of community support, a lack of reliable high-speed internet in some surrounding rural areas (making streaming difficult), and pure novelty. It stands as a living museum to the rental era, still stocking DVDs and offering the tactile experience of browsing the “New Releases” wall. A documentary titled The Last Blockbuster was filmed there, immortalizing its struggle to keep the lights on in a digital world.

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Further Reading

• Netflixed: The Epic Battle for America’s Eyeballs by Gina Keating
• Built to Fail: The Inside Story of Blockbuster’s Inevitable Bust by Alan Payne
• That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea by Marc Randolph
• I Lost It at the Video Store: A Filmmakers’ Oral History of a Vanished Era by Tom Roston

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