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Blockbuster Express Kiosk Rentals Now $1 Per Day

29 Jun, 2009 By: Erik Gruenwedel

Blockbuster Inc.’s nascent Express rental kiosks, which have just begun rolling out, will offer new-release movies for $1, not $1.99, as previously reported, according to a spokesperson.

Dallas-based Blockbuster, which plans to rollout 10,000 branded kiosks via a partnership with NCR Corp. through 2010, had originally offered first-day DVD and Blu-ray Disc rentals for $1.99, with subsequent rental days for 99 cents, according to NCR.

The Express kiosks will still charge $1.99 for first-day Blu-ray rentals.

At $1.99 for the first day DVD rental, Blockbuster Express would have charged a 50% premium compared to other kiosks, including those from industry leader Redbox, The New Release, DVDPlay and e-Play, among others.

The price reduction could help the kiosk industry realize a reported goal of a 60,000-unit install base at the end of 2010.

“This news is important because it signals that Blockbuster is more serious about trying to compete against Redbox,” said Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles. “It would have been tough to compete at a higher price point, especially since Blockbuster is the new entrant in the market. As long as it’s a $1 per day, the low price and convenience will drive growth in this industry.”

The price reduction would also suggest Blockbuster Express — similar to other kiosks — is not involved in revenue-sharing deals with the studios due to the minimum transaction fee charged by studios per rental.

With a minimum fee in most rev-share agreements from $1 per transaction, at $1.99 Blockbuster could have realized a 66% gross return for a typical two-day rental ($1.99 + 99 cents for second day minus $1 transaction fee). At $1, the gross drops to 50%.

“That changes a lot,” said Tom Hannah, owner of VideoQuest in Chicago.

A Blockbuster representative was not immediately available for comment.

Hannah said the rental price reduction could accelerate kiosk market penetration and encroachment into brick-and-mortar rental transactions. He said it is not unusual to find third-party kiosks located in supermarkets and malls in close proximity to a Blockbuster, Movie Gallery or Hollywood Video.

“And some locations are getting two machines,” Hannah said.

His response to kiosks is to become “the last man standing,” a strategy that includes operating with a smaller overhead than Blockbuster, Gallery and Hollywood storefronts and targeting consumers not interested in dealing with a machine.

Hannah said new-movie releases (within the past two months) contribute to 60% to 70% of his revenue, compared to 100% for kiosks. He said that even if 30% to 40% of his revenue is catalog rental (older than six months), sellthrough and related business, kiosks could still negatively impact his revenues as much as 20%.

“Everybody is feeling the kiosks,” Hannah said.

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