6 Questions: e-Play’s Kristen Fox26 Jun, 2009 By: Erik Gruenwedel
In a packaged-media market undermined by recessionary tumult, rental kiosks continue to make waves offering budget-friendly $1 DVD movies across an expanding retail landscape.
Upstart Columbus, Ohio-based kiosk operator e-Play (with 460 units) recently added its “bare-disc” technology to kiosks made by Dayton-based NCR Corp. The technology allows for storage of more than 4,200 discs in a single kiosk (due to a lack of case or sleeve packaging) and enables consumers to buy, rent or trade their DVDs, video games and Blu-ray Discs at the kiosks for store credit or cash voucher.
Typical rental kiosks hold about 1,000 discs or less.
Kiosk rental revenue totaled $519 million in 2008 (more than 4% DVD market share) and is projected to reach $1.4 billion in five years — about 25% of Blockbuster Inc.’s 2008 revenue, according to Adams Media Research.
Despite a 9% DVD revenue slide to $14.5 billion last year, according to Digital Entertainment Group, kiosk leader Redbox (with more than 15,000 kiosks in operation) reportedly saw revenue soar 180% to $400 million, including an impressive 52% surge in same-unit sales.
This week, e-Play followed up on a test program at Wal-Mart Stores by bowing pilot units in select Texas Best Buy locations in Austin and Dallas. The kiosks allow consumers to return used video games to the kiosk in exchange for instant store credit.
Home Media Magazine asked Kristen Fox, VP of marketing and business development with e-Play, about the kiosk explosion.
HM: Why do e-Play kiosks stand apart from the competition?
Fox: We offer the ‘buy-sell-trade’ business model for DVDs, Blu-ray Disc and video games, where customers can purchase used media and trade in their used media. Our value proposition is the commonly accepted $1-a-day rental, and we’ve added functionality to that.
HM: Are kiosks the savior of packaged-media rental?
Fox: Absolutely, and sellthrough too. We believe kiosks can be a complete merchandising solution for a lot of retailers, especially in areas such as shrinkage [theft] and establishing product and brand awareness to the front of the store instead of being behind lock and key in the back of the store.
We offer two separate models: The first is the buy-sell-trade model that can complement a retailer’s packaged-media offerings through incremental revenue. In addition we offer a merchandising solution that is an alternative to shrink-wrapped dummy cases on the shelf, with actual discs locked away in a drawer. We take the new inventory, put it into the kiosk and dispense it when the consumer brings the dummy case to the kiosk and scans the UPC code. The transaction takes place through the kiosk, which takes up a lot less floor space and requires less manpower.
If a retailer puts its inventory into several kiosks, they can utilize the freed up floor space for other offerings. They are capitalizing on their return on investment (ROI).
HM: Is used product an untapped market niche, especially in games?
Fox: Yes. Consumer acceptance to kiosks is with rental, but the added capability to trade in previously viewed merchandise for credit is unique. And taking that away from the brick-and-mortar retailer and offering it in more convenient locations is more compelling to consumers as well.
HM: Why are kiosks superior to traditional storefronts?
Fox: You don’t have the operational overhead. We take care of the inventory and the customer service aspect, and we control the complete operation of the business. For the retailer, it’s an easy turnkey solution for incremental income.
HM: Have DVDs moved beyond the impulse purchase?
Fox: We see kiosks as an entertainment currency. This “currency” is created when the consumer realizes that they have accumulated a stack of used games and DVD titles at home that they can only play and watch so many times. They are looking for an outlet and value for those titles they might not even know exist. That returned merchandise is a form of entertainment currency. What that translates into depends on each retail partnership. Best Buy issues a store gift card, while Wal-Mart issues a credit to the customer’s credit card. We also have partnerships with Exxon Mobile and Speedway Super America gasoline and convenience stores.
HM: How do kiosks stay in the good graces of studios that openly, and not-so-openly, lament rental?
Fox: Our focus is on the trade-in of used product. I don’t think there is any opposition from the studios in that market niche. There is definitely sensitivity around sellthrough of used product, and that is something that we tend not to empathize in our business platform. The draw to our kiosk is the availability of games and trade-in aspect. It is inevitable that used product is out there, and some of the major retailers are starting to offer it in their stores.
Our disposition of inventory has several methods. We tend not to focus on the kiosk as the primary avenue for getting rid of used product.