NCR in ‘Race’ for Kiosk Revenue, Market Share

By : Erik Gruenwedel | Posted: 24 Jul 2009
egruenwedel@questex.com

NCR Corp. said it has several distribution deals with Hollywood studios in place that rival the recently announced $460 million agreement between Sony Pictures Home Entertainment and Redbox.

In a financial call July 23 with investors, John Bruno, EVP industry solutions at NCR, said the company would have 2,500 Blockbuster Express DVD/Blu-ray Disc rental kiosks in operation by the end of the year — about 1,500 more than previously projected. It remains confident about rolling out 10,000 Blockbuster Express kiosks through 2010.

Market leader Redbox has about 15,000 kiosks installed, with plans for another 5,000 to 7,000 units in place by the end of the year.

Duluth, Ga.-based NCR — manufacturer of automated teller machines, self-checkout and kiosk devices, including upstart rental kiosks operated by Blockbuster, The New Release and ePlay — said installation of rental kiosks in 2009 would cost about $30 million (about $15,000 per kiosk, including inventory) and contribute to about 15 cents per share in earnings.

“We are going to move as fast as we can,” Bruno said. “This is a race around market share, it’s a race to revenue and it’s a race to margins.”

The executive said studio distribution deals being finalized include minimum titles, units and related issues.

Dallas-based Blockbuster, citing internal liquidity issues, has said rollout of its Express kiosks was dependent on third-party investors such as NCR.

Bruno said the buy/sell/trade market for packaged media represented a “great” opportunity, including the nascent video game rental market.

“From an addressable market perspective, the move-rental market is an $8 billion industry in which kiosks currently account for 6% of that,” Bruno said. “That number is growing, and we are well-positioned to capture a meaningful share.”

Bruno said video game kiosks that also accept and offer used product are well proven at the retail level.

He said ongoing test kiosks in Wal-Mart and other retail locations would be extended as the company assimilates itself with the “early days with our experimentation” adding video games to the mix.

“It’s a change in behavior for the consumer,” Bruno said. “We are very encouraged in what we see in the early days of those businesses. The ramp-to-revenue on one of those [kiosks] is actually doing better than what [it was] in the early days on just pure DVD.”

Gil Luria, analyst with Wedbush Morgan Securities, said NCR’s deal with Blockbuster could give it a brand awareness advantage over Redbox.

“They may be able to capture 50% of the incremental share going forward, but again, Redbox starts off at a higher point,” Luria told Reuters.

Continued downward economic pressure on financial services, retail and hospitality industries contributed to NCR Corp. reporting second-quarter (ended June 30) income of $23 million, down 48% from income of $44 million during the previous year period.

Total revenue for quarter fell 16%, to $1.2 billion, from $1.3 billion last year.