Rataj Berard
Worker-owners Andy Fox, Nick Propheter, Helen Boldt and Lewis Peterson purchased the store in 2014.
Think of it as a film festival that never stops. Over three decades, Madison’s Four Star Video has won generations of fans and — so far — defied industry trends. “Four stars to Four Star,” quipped the late film critic Roger Ebert, an early and enthusiastic supporter.
The late film critic Roger Ebert, pictured at Four Star in 2003, was a big fan.
Now the small business is on to its second act. A year ago, four of the store’s seven employees came together to purchase the store and its 20,000 titles on 45,000 discs when they feared the collection would be broken up and sold off. On Aug. 1 Four Star kicks off a month of celebratory events in honor of its first anniversary as a worker-owned cooperative.
In a streaming world, how can a disc rental business survive? Brick-and-mortar video stores are a rarity these days, and Four Star Video Cooperative is the only one left in Madison. But while national sales trends are not promising, some industry observers say the disc trade isn’t dead. The new owners of Four Star Video Cooperative also hope to capitalize on support for cooperatives in a city with several thriving examples. Most of all, they are paying close attention to movies and to customers, because they are the only place left in town where a real, live human being — and a knowledgeable one to boot — will help you make a choice about your home entertainment.
That person-to-person connection has built a loyal customer base for Four Star. “I’ve not been able to really find anything like it anywhere,” says Derek Lowes, an equity trader from Milwaukee who visits the store as often as he can, at least monthly. He discovered it when he was a student at UW-Madison.
Don Thompson, a Madisonian who started going to Four Star in 2000 when he lived in Wisconsin Dells, also comes back because of his relationship with the worker-owners. “They’re all just wonderful people,” he says. “They’re knowledgeable, they’re friendly. If I want something, they’ll look it up for me, and they’ll purchase it.”
They are also entertaining, says David Williams, a retired librarian who works part time at Browzers Bookshop on State Street. “The staff there is a regular standup comedy team. I really appreciate them, and I support the idea of worker co-ops.”
In 1985, Roger Moore made his last James Bond movie, Jimmy Stewart received an honorary Oscar for lifetime achievement, and Back to the Future topped the box office for the year’s releases. Also, David Smith opened Four Star Fiction and Video Book Store and Rental.
What made Roger Ebert an early fan while visiting Madison was the store’s combination of mainstream releases and quirky offerings, including silent movies and a vast variety of foreign and independent films. The store was also known for its selection of gay-oriented movies, including pornography, a department that continues on a smaller scale today.
Lisa Brennan worked at the store, and bought it in 2003. Four Star moved from 315 N. Henry St. to its current location at 449 State St. in October 2011. While the official address is on State Street, the store actually fronts North Broom Street, between Riley’s Wines of the World and the intersection of Broom, West Gilman and State streets.
It’s not as visible now, especially to motorists. The storefront is slim and easily missed; most of the collection is downstairs. “We still have people who will call or stop in and say, ‘Oh, I thought you guys closed years ago,’” says Nick Propheter, who began working at Four Star in 2011.
“The new space has a lot of advantages over the old, but the biggest factor is that it’s less expensive,” Brennan told Isthmus during the relocation. But more was going on than that.
“The convergence of the recession with technology changes has created serious challenges,” she noted. Bongo Video, another local independent store, had closed just a month before at its third and last location on Monona Drive. Madison’s only other independent, Video Station on University Avenue, closed sometime after that. Four Star is the last independent standing. Its nearest chain competition is just a few blocks away: an automated Redbox disc rental vending machine in the entryway of Capitol Centre Market.
But really, competition lurks everywhere.
Starting in the late 1990s, consumers began to access digital content online as broadband expanded. Today we watch a bewildering variety of screens, from “connected TV” and desktop to wristwatch; two-thirds of Americans now prefer to watch movies outside of a traditional theater. Despite these innovations, 70% of recorded video consumption occurs on a regular old TV screen, according to Parks Associates, a market intelligence firm.
And that consumption is big business: In the first quarter of this year, U.S. consumers spent $4.6 billion on home entertainment, including games, according to the Digital Entertainment group, a nonprofit industry trade association. Total 2014 spending was $17.8 billion.
At the online megalith Netflix, rental of physical discs via mail accounts for 50% of total operating income. But industry-wide, disc rental is falling.
In 2013, all U.S. disc rentals totaled $4.2 billion; in 2014, $3.7 billion. Numbers in the first quarter of 2015 have stabilized, but IHS Technology, a research and analytic firm, estimates the year-end total will be $3.3 billion.
Still, some insiders believe we are not seeing the end of the disc. “The thesis that DVD rentals will decline due to the popularity of video-on-demand is going to prove wrong,” according to one industry observer quoted in “Discs & Digital: The Business of Home Entertainment Retailing,” a 2015 U.S. economic and trends report from the Entertainment Merchants Association. For some customers, it comes down to cost: A $1.50 rental from a Redbox vending machine trumps the average $5 to $6 video on demand fee.
In industry lingo, Redbox is termed a “transactional disc rental provider,” and it’s the biggest in the U.S., with 35,000 kiosks and 734 million discs.
Four Star is another transactional disc rental provider, and as an independent, it does have one advantage over a chain like Redbox: Movie studios offer an early-release window just to the independents. The Entertainment Merchants Association reports that, at the end of 2014, there were still 3,644 independent video rental outlets in the United States. That figure is misleading, though: It includes supermarkets that rent from their own disc collections.
Even though streaming is here to stay, sometimes our entertainment habits are surprisingly static. It’s anyone’s guess how many people actually still use them, but according to a 2014 Gallup poll, 58% of Americans still have a VCR in their home.
Filmmaker Brandon Colvin on Four Star: “It totally satisfies my impulse viewing.”
Brandon Colvin, a doctoral student who teaches film at UW-Madison, embraces the new along with the old. He subscribes to just about every disc rental and streaming service you can imagine.
And yet he patronizes the video store. “I love Four Star,” says Colvin, whose feature films, Frames and Sabbatical, have been screened at the Wisconsin Film Festival. “The streaming platforms have limited libraries, generally. With Netflix disc [service], it’s hard to make an impulse choice to watch something. But with Four Star, if I want to see something I can just drive five minutes down Gorham Street and pop in and grab something. It totally satisfies my impulse viewing.”
Colvin says it’s getting harder to find what he’s looking for on Netflix. “It’s been known for a while that they’re phasing discs out of their whole company. They’re just not getting new stuff. They’re not getting more obscure movies.”
And that’s where Four Star provides a critical service. “The Four Star people have excellent taste,” says Colvin. “And they get everything in.”
Andy Fox, one of the four staffers who came together to form the cooperative, agrees: “To even begin to approach the selection we have here, you’d have to sign up for multiple online streaming services and DVD rental services. That would probably cost you somewhere between $60 to $100 a month.”
By early 2014, the clock was ticking for Four Star. The staff knew Brennan preferred not to liquidate, but the lease was coming up for renewal, and she was selling her home and wanted to leave Madison.
“She didn’t really approach too many people as far as I know about purchasing the store or the collection,” says Propheter. “It basically came down to either we did something to keep the place going, or it was going to be gone.”
Propheter admits to being personally motivated by the challenge: “There was just a lot of the collection I hadn’t gotten to yet.”
The staff started to think of options. Four of them, including Propheter and Fox, wanted to take action, though none knew much about management, marketing or business, for that matter. But they did know an awful lot about this particular business and how it revolves around high-quality, personalized customer service.
“We were all longtime customers before being hired,” says Helen Boldt, who joined the Four Star team in 2011. “I was going into the Henry Street location almost every day for quite a while before I got the job.”
Fox, who says he was “blown away by the foreign collection” when he started working at the video store in 2012, talked to a bank loan officer about purchasing the business himself. He laughs about it now, but at the time, he was scared.
“I was talking to [the loan officer] about a $150,000 loan. Luckily, he realized that I didn’t particularly know what I was doing. I don’t think I would have signed. I like to think that I wouldn’t have.”
Settling on a cooperative model went slowly for Boldt, Fox, Propheter and a fourth employee, Lewis Peterson, but it helped that Madison is a hub for worker co-ops, due in part to the work of the UW Center for Cooperatives. “They were just so open with their information, to help us with our structuring. That was really helpful, to have a blueprint to work from,” says Boldt. The team also began talking to customers who worked for local co-ops, such as Community Pharmacy, Union Cab and Willy Street Co-op.
Once they decided to move forward on a co-op, the four also needed to decide which kind they would form. Would customers raise capital for Four Star’s purchase by buying memberships? Or would this be an employee-owned co-op? Madison has successful examples of both kinds. Ultimately, says Fox, a worker co-op model made the most sense for the four principals, who were already good friends.
“The idea of one of us owning the place would be bad for interpersonal relationships, and also sort of unmanageable for one of us because of the financial burden,” says Fox.
The four began a crowd-funding campaign with a goal of $50,000. “We didn’t meet our goal, but we ended up with about $10,000 in the bank,” says Peterson. Better educated and better armed by last spring, Fox began visiting banks on behalf of the group. “The pitch was: ‘Well, we have $10,000, we have all of this public support, we have a business plan and all the numbers, and here are our business records for the past three years,’” says Peterson. “At that point they actually didn’t laugh us out of the building. It was, ‘Hey, we can do this!’”
Two financial institutions tentatively agreed to help, and the team settled on Summit Credit Union. “They’re used to working with co-ops,” says Boldt, noting credit unions are themselves co-ops.
But the group hit another snag when the proffered loan didn’t match Brennan’s asking price. They’d received a six-month extension on the lease while raising money, but the landlords were pressing for a decision. “It got to the point where we just put the offer on the table,” says Peterson.
It was up to Brennan.
“I did kind of want to keep it in the family,” says Brennan, speaking from Tacoma, Wash., her latest stop on a “sabbatical” where she has been traveling, kayaking and hiking. The notion of a cooperative was appealing to her. “Running a small business is very high maintenance,” she says. “There’s a lot of pressure, and there’s a lot for one person. They have that support system built in. More flexibility, more creativity. I like the model a lot.”
Brennan came way down on her price, and the deal was done.
That was a year ago. And now?
Business is good, according to the owners. And things have settled down after the tumult of moving and change of ownership. “We’ve had so many remarks just about the change in mood,” says Fox. “There was a lot of tension in the store prior to our buying it — not really knowing what was going to become of our jobs.”
Colvin says he remains a satisfied customer: “Since they’ve taken ownership, I think they’ve done a lot of things to communicate more effectively with the customer base.”
For purposes of incorporation, one of the four worker-owners had to be named president, another treasurer and another secretary. They plan to take turns, and insist that, off paper, they are have equal power, though they each have their own strengths. The four worker-owners employ two additional staff members.
“I feel the most comfortable with numbers,” says Boldt. “To me, Andy [Fox] has the most patience, so he’s been super helpful with the more bureaucratic end of things, and he knows the computer system that we have really well. Lewis [Peterson] and Nick [Propheter] do the ordering. I’d say they’re the biggest movie geeks out of the four of us, and really enjoy seeing what’s coming out and getting a broad range of things for the store.”
Brennan says the store is in good hands: “They’re so competent and dedicated. I’m very impressed with the work that they’re doing.”
All decisions are made by consensus among the four owners, with input from the two other staffers. “We’re all very close, but we do fight, which I think can be a good thing,” says Boldt. “Fight openly and find a resolution. I love them all.”
“We would not be here without all four of us together,” says Propheter. “There’s no way that this would work without each of us doing what we do.”
