In 1960, Erol Onaran left Turkey with $32 in his pocket. Having spent half that sum in Rome, the television repairman arrived in the United States with only $16.
In the 25 years that have passed since his arrival, Onaran has singlehandedly parlayed his $16 into a multimillion-dollar enterprise that is the nation's largest privately owned videocassette rental company.
With 63 stores that bear his first name in Washington, Baltimore, Norfolk and Philadelphia, Onaran oversees 2,000 employes and about $80 million in annual revenue, he says.
Although that may be far from his humble beginnings, Onaran -- who became a U.S. citizen eight months ago -- said his company is really quite modest compared with his ultimate dream. "Our goals are very simple -- we want our business to double every year," he said.
Onaran's success in capturing about 40 percent of the rapidly growing local video-rental market has earned the 51-year-old entrepreneur the title of "Video King" among his competitors. Among other things, they credit his company's massive advertising campaign -- which costs about $6 million a year -- with calling attention to the area's video-rental industry, greatly enhancing the business in the process.
"Erol's is a real positive force in our market," said Tom Ray, president of the local chapter of the Video Software Dealers Association. "A lot of other companies have learned a lot from him."
"Erol is a fine, shrewd, aggressive businessman," according to Frank Barnako, owner and president of The Video Place, the second-largest video club in Washington with 10 stores in the metropolitan area.
However, many of his rivals complain that the company's size and tactics make it impossible for them to be viable competitors.
"You can't compete with Erol. He's a giant," said Krishan Satija, owner of Video Corner in Arlington.
"Erol's has made the Washington area the most competitive video-rental market in the world," Sam Totah, executive vice president of Video-to-Go, noted last month when he confirmed that his firm was going out of business. "Erol's has become to the video-rental business what Frigidaire once was to the refrigerator business. It's a tough row to hoe against them," he said.
One of Video-to-Go's advantages was that it allowed customers to shop for a tape at home, from a catalogue, and have the tape delivered to a neighborhood outlet. But it failed to attract customers, primarily because video watchers usually don't like to plan ahead. "It's hard to change people's habits," said Onaran. "People just want to go and touch the tapes and look at them."
Another important factor in Video-to-Go's demise, Totah said, was Erol's presence. Even though Video-to-Go's rental fees were less than Erol's, video viewers continued to shop at Erol's.
Other rivals say that Erol's makes competition all the more difficult by its tendency to locate new stores very close to -- if not in the same shopping mall -- as existing, smaller video-rental shops.
"His marketing strategy seems to be to get into the same shopping center -- or as close as he can go -- to an existing store and to siphon off its customers," said Greg Warrick of VIP Video. Warrick said he had to close down his store near Seven Corners -- one of three in his chain -- after Erol's set up shop five doors away from VIP Video. "Because of his resources against the small guy's resources, it is impossible to compete," said Warrick, citing at least a half dozen other concerns that have been adversely affected by Erols' move into their territories.
Onaran, noting he was once a small businessman, said it is not his intention to drive smaller competitors out of business. "I'm sorry to hear" that complaint, he said. "But I didn't go to these locations on purpose. I didn't go there to put them out of business. But I'm a businessman -- if my people say it is a good location to be in, we take the place. We can't be successful if we say, 'Well, there's another guy here so we can't move here,' " he added.
Onaran disputed the notion that he is the area's "Video King."
"You may call me that, but I'm just a businessman who likes to have fun," he said.
Onaran said he came to the United States from Turkey -- where he said he ran a profitable radio repair shop -- specifically to be a successful businessman. Yet, he said, "I thought I'd be a manufacturer of televisions or radios."
His first job here was as a radio and TV repairman with Fulford's Televison, then with German Hi-Fi. "One day, they fired me. I forgot what the reason was, but maybe I was too pushy or too greedy," he said.
Shortly after that, Onaran opened an independent TV repair business with a friend whom he bought out three years later.
"A couple of years after we started, we began selling Zenith black-and white televisions, then color TVs. We gradually sold more and more" to the point that selling televisions became a bigger business than repairing them, he said. "We played around with selling stereos and radios but that didn't work out. We even tried to sell washers and dryers," but that, too, proved unsuccessful.
Onaran said he came to the video-rental business reluctantly. "I sold a few movies at first, but I never believed that people would pay $100 for a movie," he once said. "Most other people started renting movies a year before I did. I didn't want to go into it because I was not sure it was legal. When I saw everyone else doing it, I didn't see anything wrong with me doing it," he said.
So in 1980, Onaran set up his first video club in the manager's office in the Arlington store.
Today, Onaran estimates that video rentals account for about 60 percent of the company's business. Erol's continues to sell televisions and videocassette recorders in 22 of its 63 stores. But Onaran said he does not plan to significantly expand the hardware segment of his business -- despite previous reports that he planned to sell TVs and VCRs at his smaller video-club units.
"Hardware is not profitable," he said. "Renting movies is more profitable. . . . It is a lot easier to duplicate video-rental stores. It's like McDonald's. Once you set one up, it is easier to do more." The cost of setting up a new store is near $400,000, Onaran said.
Onaran acknowledged that he owes much of his success to the booming VCR business -- a business that is only 10 years old. According to the Electronics Industry Association, more than 22 million VCRs have been sold since 1975, meaning that nearly one out of every four households in America now has a VCR. That number should climb even higher in the coming year, according to EIA, which predicts that another 11.5 million VCRs will be sold. Continued price reductions on the part of manufacturers are expected to be a major stimulus for sales.
Video Store magazine says that the video business is growing so fast that by the end of next year, the cassette sale and rental business should exceed the $4 billion annual income taken in by the nation's movie theaters. This year, the magazine says, revenue from cassette sales and rentals will total $3.3 billion -- up from $1 billion in 1983. About 90 percent of the $3.3 billion is rental fees; the rest, sales of cassettes to consumers.
With demand for videocassettes steadily growing, Onaran is confident his business will become even more successful in the years to come. "You can buy a good VCR for less than $300. Almost anybody can afford a VCR now, so our business will grow faster than most people think. If the number of VCRs doubles, this business will more than double," he said.
Onaran said he sees no threat from cable television. "If you want to watch a movie on cable television, you subscribe to Home Box Office and then have to wait for the right time for it to be shown. And then you are limited to what you can watch -- they show only four to five new movies a month. In our stores we have at least 1,000 different titles. Even if you watched four a week, it would take you 200 weeks to watch them all -- that's four years!"
Onaran is clearly gearing up to take advantage of the growth he foresees. Although Erol's moved into new corporate headquarters at a remodeled warehouse in Springfield, Va., late last year, the company already has run out of space -- particularly the space needed to process the 3,000 new tapes it receives daily.
It is also running out of store locations in the Washington area, where it now has 50 stores. As a result, last winter, Erol's placed an ad in the newspaper asking consumers to "help Erol choose his next video-club location."
"It was not a marketing gimmick -- but one of the best ways to find out where our services are needed," he said. He said that the results were as he expected, with most consumers suggesting that Erol's set up shop in the District of Columbia, where it has no video clubs -- a fact that competitors are often quick to note.
Onaran said he would like to set up shop in the District but so far has been unable to find the right location. "We can't find locations in the areas we want to be," he said. "We need a lot of parking, so it is impossible to find a good area." However, he added, Erol's is currently talking to Hechinger Co. about setting up a shop in its new Northeast mall. "We are also talking about putting a club on upper Georgia Avenue."
Additionally, Erol's is considering breaking its rule that all stores have the same hours and opening a downtown club, which would need to be open earlier than other clubs to meet the needs of its customers. "We might try it to see how it works."
Onaran said he thinks the entire metropolitan area could support 30 more Erol's clubs over the next three years. He said he expects the largest growth to come in the other cities where Erol's has set up shop -- particularly Philadelphia.
On the surface, Onaran appears almost casual about the business -- not coming into his office until 1 p.m. and wearing a casual sportshirt -- never a tie or sportscoat. But Onaran said that he spends most of his mornings working on computer programs for the store.
Industry officials cite the stores' computerized check-out system that Onaran says he helped develop as a major reason for Erol's success.
At most other video-rental stores, customers select the tapes they want from empty cassette boxes displayed on the shelves. They then take those boxes to the check-out counter where they are exchanged for actual tapes, stacked behind the counter. The transaction usually takes several minutes.
At Erol's, everything is computerized, and the customer picks up a real tape -- in a special box built by Erol's to withstand repeated use. The box, as well as the member's card, bear a bar-code similar to those found on grocery store products. A clerk waves a light pen over the bar codes of both, and the transaction is completed.
At 51, the chain-smoking Onaran said, "I will never retire. I don't do this to make money -- I do this to make fun." He won't disclose how profitable the privately held company is, saying only that "we make enough to pay our people and still have some pocket money."
He also made it clear that the company makes enough to meet its expansion plans on its own -- without the help of outside investors. In fact, Onaran stressed, he does not want to sell company stock to the public.
"I doubt my nature would let me. . . . I don't want to answer to anybody." CAPTION: Pictures 1 through 6, Erol Onaran of Springfield, Va., office with flag given to him when he became an American citizen; Workers stack new videocassettes at Erol's headquarters in Springfield, Va.; Erol's employes maeke sign for one of firm's 63 stores, which stretch from Norfolk to Philadelphia; Customers drive up to Erol's store on Columbia Pike in Arlington; Erol's worker sort through videocassettes in special boxes with computerized bar codes;Erol's founder Erol Onaran displays wall full of ads, on which company spends about $6 million a year. Photos By Frank Johnston -- The Washington Post