Indie Kiosks Welcome Probable Extended Release Embargo17 Oct, 2011 By: Erik Gruenwedel
With Warner Home Video likely to lengthen the 28-day embargo to 60 days for kiosks such as Redbox and Blockbuster Express beginning next month, independent kiosk operators welcome the news.
“Bring it on,” said Dan Kearney, who owns and operates two rental kiosks under the DBA “EnjoyNewReleases” with his wife, Mary, in Milford and Shelton, Conn.
Kearney, who is a full-time airplane mechanic, said that should Warner Home Video and other studios follow through extending new-release embargoes to 60 days, the disruption to Redbox and Blockbuster Express would be a gift to his business.
“It will actually help my business [www.enjoynewreleases.com] because I could purchase movies elsewhere other than the main distributors,” he said. “New releases are 99% of the rental business. If I don’t have a new movie in the kiosk right away, I’ll get emails from customers wanting it right away.”
“Elsewhere,” of course is code for big box retailers such as Walmart and Target that get new releases on street date, thereby providing an ideal and legal route to embargoed content — often at loss-leader pricing.
Jennifer Wagner, who owns and operates three kiosks under the DBA “Pik Ur Flik” in the Minneapolis, Minn., area said she has no problem with an extended window as long as a legal alternative exists.
“I play by the rules regarding sales and rentals, and as long as I continue to do that there shouldn’t be a problem,” Wagner said.
Wagner and Kearney are among a growing number of entrepreneurs who have jumped on the kiosk rental bandwagon created by Redbox but also are ignored by the industry leader in smaller secondary markets.
“They are everywhere in the big stores, but they don’t service the small-to-mid-sized businesses, which want to have rental kiosks for their customers and they just can’t get it,” Wagner said. “And that’s where I come in.”
Indeed, Kearney operates his kiosks at a gas station and an independent grocery store — locations he said Redbox wouldn’t typically touch. Indie kiosk operators share rental revenue with the retail operator in exchange for setting up shop. With no investment or labor requirement, an indie (or Redbox, Blockbuster Express) kiosk can become pure incremental revenue to a third-party retailer.
Rental prices are left up to the owners and typically follow market patterns. New DVD releases not available at Redbox or Blockbuster Express rent for $1.99 on street date, and 99 cents a day for titles that are available there. Subsequent rental days actually increase to $1.49. Exclusive Blu-ray titles start at $2.49 on street date ($1.99 for industry-wide releases) and $1.49 a day thereafter.
Because the two entrepreneurs operate a small number of kiosks, buying new content on a weekly basis at retail doesn’t require the financial outlay that forced Redbox to sign distribution deals with the studios. But it does require astute fiscal management without Redbox’s and Blockbuster’s deep pockets.
Wagner and Kearney each got into rental kiosks under a program launched by DVDNow, a Vancouver, Canada-based vendor of kiosks that says it has 1,100 authorized vendors (not franchisees) operating 3,000 units in North America and Mexico.
Setting up an initial kiosk, including inventory, can reportedly cost as much as $20,000.
In addition to either purchasing or renting the actual kiosks, entrepreneurs are given online training about operating kiosks and familiarizing themselves with disc distribution and how new releases work every Tuesday (and now often Friday, too).
Wagner and Kearney also took advantage of DVDNow software that allowed them to create business websites where consumers can become members, catch up on specials, discounts and address FAQs.
Wagner, who owns her own marketing company, went a step further and launched a Facebook site for the kiosks, which accommodate 250 discs. Most of the titles stocked are either new releases, children’s fare or “chick flicks,” she said.
“We’re not a big horror vendor,” she said.
In addition to new releases, Wagner stocks her kiosks with about 75 used discs (primarily DVD) of the top movies released during the previous year. Titles are acquired second-hand and then cleaned with an automated disc cleaner.
“You just have to be smart buying titles,” she said. “What really excited me about the kiosk business was that I realized I could do all the advertising and marketing myself.”
Indeed, retail employees in the stores in which Wagner operates her kiosks currently are sporting badges asking customers to inquire about “Pik Ur Flik” and get a free movie rental.
“Two of the stores are also adding fountain drinks to the offer,” she said.
Wagner limits Blu-ray rentals to action titles and animation.
“Horrible Bosses in Blu-ray is not going to matter as much as Transformers,” she said.
Kearney said customers opt for his kiosks despite the presence of a Redbox nearby due to convenience and availability of new releases. Kearney said the kiosks, installed a year ago, are paying for themselves and turning a profit.
“Redbox in some ways complements our business,” he said.