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Keyes: Blockbuster Not Supplying ‘Express’ Kiosks with New Product

21 Sep, 2009 By: Erik Gruenwedel

The rollout of 2,500 Blockbuster Express $1-per-day movie rental kiosks through the end of the year includes partner/owner NCR Corp. acquiring new release content, not through Blockbuster, but from DVD distributors and third-party retailers. Dallas-based Blockbuster is supplying the kiosks with catalog titles.

Speaking at a recent Pali Capital conference call, Blockbuster CEO Jim Keyes said the Dallas-based No. 1 DVD rental service is receiving a license fee for use of the Blockbuster name and that NCR is supplying Express kiosks with content acquired through distributors such as VPD and Ingram Entertainment and retailers such as Wal-Mart.

With some of the biggest summer box office titles slated to street in the next few months, fulfillment looms a larger issue as Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment mandate 28-day, 30-day and 45-day windows, respectively, for their new-release product distributed through kiosks. In addition, the limited capacity with kiosks to stock multiple copies of popular titles underscores an inherent weakness in the distribution channel, according to Keyes.

“For Blockbuster, that’s a real consumer conundrum,” he said. “How do you present the brand value that you want, the brand image that you want and constantly disappoint customers?”

As a result, the CEO said Express kiosks are testing various prices for new-release content, which he said represents about 80% of Blockbuster’s business. He said Express kiosks in the future would also stock new release titles (“Blockbuster Premiers”) garnered through exclusive deals with studios.

“[We are] proactively working on diversifying our content,” Keyes said.

The executive said he was interested to see the impact of NCR-made e-Play kiosks, whose units allow for trade-in of used products, including video games. The kiosks are currently being tested in about 80 Wal-Mart locations in the Northeast.

Wal-Mart spokesperson Melissa O’Brien denied scuttlebutt the retail behemoth was considering bowing proprietary rental kiosks.

“There is nothing we are doing or sharing out there right now that’s just on our own,” she said.

Keyes said he expects (and hopes) there will be an industry-wide imposed window on new-release rentals through kiosks by the end of the year.

The executive said he welcomed delays imposed upon kiosk and by-mail services such as Netflix because it wouldn’t affect Blockbuster’s multi-channel business model that includes traditional brick-and-mortar stores. Indeed, mandating new releases through rental and retail channels first would allow Blockbuster to amortize content prior to its kiosk release thereby making the $1-per-day fee more attractive.

“From the Blockbuster perspective, our business is really about making sure there is an important part of our multichannel opportunities,” Keyes said. “We’re less sensitive to the actual individual economics in the near term.”

The CEO wasn’t sure how many kiosks the U.S. market could handle (from 40,000 to 50,000 he guessed), adding that he thought the biggest market potential for Express kiosks was in Asia and Europe where the Blockbuster brand is strong and consumer awareness of vending is common.

“You don’t have to explain to anybody what it is,” Keyes said. “It’s a huge and virtually unlimited opportunity for us.”

Separately, Blockbuster said it had entered into an alliance with cable operators Suddenlink, Mediacom and Avail-TVN to broaden the appeal of each company’s video-on-demand (VOD) service via in-store kiosks and in-store promotions. The deal would re-brand select VOD services under the Blockbuster label, in addition to educating cable subscribers looking for a movie not available on VOD about locating a title at Blockbuster by-mail, kiosk, in-store or electronically.

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