Dish to NCR: Drop ‘Blockbuster’ Name From Kiosks13 May, 2011 By: Erik Gruenwedel
Dish Network has asked NCR Corp. to stop using the Blockbuster trademark on its 9,000 Blockbuster Express rental kiosks, effective May 26.
The Englewood, Colo.-based satellite TV operator issued the cease and desist request in a May 10 court filing alleging that the NCR license agreement was not assumed in the bankruptcy and subsequent $320 million asset sale, according to a spokesperson.
Dish has used the same rationale for rejecting other vending and distribution agreements, including select revenue-sharing deals with studios.
"The NCR contract was not assumed in the bankruptcy," Dish spokesperson Marc Lumpkin wrote in an email. "Blockbuster continues to evaluate the kiosk rental business and the variety of ways we provide access to our expansive inventory of family entertainment."
Duluth, Ga.-based NCR owns and operates Express kiosks through a license agreement with Dallas-based Blockbuster Inc. — an agreement that is reportedly safeguarded by trust not affected by the bankruptcy, according to spokesperson Jeff Dudash.
“Blockbuster is a beneficiary of that trust, but Dish can’t terminate the trademark agreement,” Dudash told The Dallas Morning News.
Indeed, NCR plans to roll out another 2,000 Express kiosks this year as it maintains a distant No. 2 market status to leader Redbox. NCR, which entered the kiosk business after acquiring The New Release and DVDPlay, said it remains committed to the kiosk business.
“It is NCR Corp.’s kiosk business, not Blockbuster’s,” Dudash said in an email.
Eric Wold, director of research with Merriman Capital in San Francisco, said the issue will ultimately be decided by the court, if it gets that far. He said Express kiosks continue to underperform compared with Redbox units, including generating about $20,000 in first-year revenue, compared with $30,000 for Redbox kiosks.
“Remember that it is NCR that owns and operates all of the kiosks and has the distribution relationships with all of the studios. Blockbuster's only involvement was providing use of the brand for a licensing fee,” Wold wrote in a note.
The analyst said Redbox parent Coinstar Inc. would be well advised to move on Blockbuster Express agreements with Safeway (1,694 stores) and Publix (1,034 stores), should NCR’s license agreement not be enforced.
“If there is any shake-up in NCR's access to the Blockbuster brand, we believe that Redbox could gain, at a minimum, from business disruption at NCR (as they rebrand the kiosks and/or put the business up for sale) and, at a maximum, from the acquisition of NCR's DVD rental division and elimination of the one remaining competitor,” Wold said.