Yesterday I saw that the local Hollywood Video I pass on my regular running route is selling its entire inventory because it will be closing. It is part of a struggling chain which has filed for bankruptcy:

NEW YORK - Movie Gallery Inc., owner of the Hollywood Video movie rental chain, has filed for Chapter 11 protection and plans to close 805 stores -- about a third of its total.

Its the second trip through bankruptcy court in just three years for Movie Gallery. The company is struggling with competition as more people choose to stream videos online from Netflix Inc. and other services or pick up $1-per-night rentals at Redbox kiosks.

The company, which is based in Wilsonville, Ore., first landed in bankruptcy court in October 2007, unable to sustain the debt it took on in its $850 million acquisition of rival Hollywood Entertainment Corp. in 2005. Movie Gallery agreed to assume about $350 million of Hollywood Entertainment's borrowings as a part of the deal.

Hollywood Video was the target of a hostile takeover attempt, initially announced at the end of December 2004 by competitor Blockbuster Video. In February 2005, Blockbuster announced an exchange offer of $14.50 per share ($11.50 cash and $3.00 in Blockbuster shares).[19]

In order to create a stronger position against the hostile takeover, Hollywood Video agreed to a buyout on Monday, January 10, 2005 by its smaller competitor Movie Gallery. Movie Gallery paid $860 million, $13.25 per share, and the assumption of $380 million in debt. Stocks closed at $13.85 on January 10 after these news. Blockbuster then dropped its purchase plans, citing anti-trust concerns. Movie Gallery completed its purchase of Hollywood Video on April 27, 2005.

The take over, and the failed attempts to integrate the brands, resulted in Movie Gallery filing bankruptcy in 2007, though the company recently emerged from this with plans of revitalization and consolidation.

And so is Netflix, which I use out of simple convenience. Netflix has saved me a ton of time, as I remember when I used to wander around aimlessly looking for something to rent, not being interested in anything, and I would often "settle" for something unsatisfying. This is not to say there aren't films I would like to watch; it's just that I can't walk around remembering them. In my video store rental days, whenever I would hear or read about a film that sounded promising, I would write the name down on whatever scrap of paper was handy. But writing things down on little pieces of paper is not a good system, because the little pieces of paper would get lost, or else I wouldn't happen to have them with me when I went to the store. Video lists are not like grocery lists because it's not practical to walk the aisles and remember what you need when you see it. With Netflix, however, the process works 24/7 because as long as I'm near a computer I just open my queue and add the film and it stays there until I get it. And it just comes in the mail and I can watch it whenever I want, then throw it back in the mail. No hassle about drop off times or hours. Plus, if you're renting something like Querelle or Behind the Green Door, unless you're a voyeur you might not enjoy the concealed look of surprise you get from the impressionable kid who has to go back and get it for you. Or (as happened to me in the case of the classic Behind the Green Door) the employee might actually warn you about the "x-rated adult content" and ask if you're really sure that's the film you want. Granted, that experience amused me, but not everyone has my dark sense of humor. Anyway, Netflix is completely anonymous, and even though they don't have Beyond the Green Door, they do have Querelle. Sure, there's an electronic record for the snoops, but there's also an electronic record at a store. And unless you have fantasies about being nominated to the Supreme Court and getting the Clarence Thomas treatment, it's not worth worrying about. I couldn't care less who learns what I rent, and if I did, I wouldn't use Netflix or Blockbuster.

As to the success or failure of a business, the market takes care of these things. It turns out that it was unwise for Movie Gallery to acquire Hollywood Video, and if they both go down, that's just what happens. It's unlikely that the government will bail the company out, because it's not considered "too big to fail." (Whether Blockbuster is, who knows? The company is said to be teetering on the verge of bankruptcy, and it is "a key outlet for the movie industry," so the question has actually been raised.)

But imagine the absurdity if the government did bail them out. Far from making a unsuccessful venture successful, the bailout would only stretch out the failure process, and allow greater losses to accumulate, sticking the taxpayers with the losses. OTOH, putting the government in charge of video rentals would facilitate controls on what we watch, so it might appeal to certain moralists, like the people who think The Tin Drum is "pornographic," or who believe in saving us from "erototoxins." Once the government is involved, moralists will be able to complain that their tax dollars are "subsidizing" whatever it is they don't like, and they would have a point.

So big or small, let them fail. Preventing failure prevents success.