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Six Questions: NCR Entertainment VP and GM Justin Hotard

15 Oct, 2010 By: Erik Gruenwedel

When it comes to disc rental kiosks, it might be surprising that NCR Corp. is pursuing market leader Redbox, and not vice-versa. That’s because Duluth, Ga.-based NCR (which stands for National Cash Register Co.) is synonymous with self-serve vending. It practically invented automated retailing with the creation of the first mechanical cash register in 1884.

NCR developed the first automated credit systems in 1914, and first commercialized barcode scanners in 1974. Yet, the company didn’t get into DVD rental kiosk full-time until two years ago when it launched Blockbuster Express through a license deal with Blockbuster.

With about 7,000 kiosks in operation, NCR’s retail footprint still pales in comparison with Redbox — despite fielding a kiosk some would argue has greater consumer appeal due to Blockbuster’s familiar blue hue, a 26-inch LCD screen showcasing movie trailers and larger disc capacity.

NCR continues to quietly encroach upon Redbox’s territory, the latest involving the rollout of 207 Express kiosks at Bi-Lo grocery stores in the Southeast, including supplanting 168 Redbox kiosks. With expansion come costs, which prompted NCR to ink a distribution deal recently with Universal Studios Home Entertainment that mirrors similar agreements Redbox and Netflix signed with the studio, 20th Century Fox Home Entertainment and Warner Home Video.

With NCR not acquiring content directly from Blockbuster, it needed to establish more economically friendly distributors than third-party retailers. Unique to the Universal deal is that Express kiosks at times will present new-release titles for sellthrough, not just rental.

In addition, Blockbuster Express will offer select Universal titles on street date for rental prices exceeding the ubiquitous $1-per-day rate. Home Media Magazine asked Justin Hotard, VP and GM of NCR Entertainment, to elaborate on the strategy, among other issues.

With NCR/Blockbuster Express willing to offer select Universal titles on street date above the $1 daily rate, in addition to sellthrough, how elastic is the kiosk rental price for new releases? Do you see the $1 price point increasing in the near-term?

Hotard: Based on our research, we think there is an opportunity for a premium offer around day-and-date DVDs, and we’re pleased to be working with Universal to test it. We also understand that affordability is an important value proposition for DVD kiosks, so we are giving our customers a choice of lower cost versus earlier access so they can make an informed economic decision based on their viewing habits.

Some Wall Street pundits believe the 28-day window benefits studios, Netflix and kiosk operators (through lower content costs) at the expense of the consumer. Do you agree?

Hotard: With our Universal deal, we are able to put more of the top box office titles in our kiosks while maintaining the same low price. For example, our customers this month are more likely to find Robin Hood or Get Him to the Greek available when they want it for just $1 per night. We see price and availability as two big wins for the consumer, so it is one of those great situations where everybody wins.

With upstart companies such as Public Media Works, Global Axcess Corp., and others, planning to roll out rental kiosks, is the market becoming saturated?

I don’t think so. We still see an opportunity for tens of thousands of additional kiosks in the marketplace. We believe our offer is unique as we provide broader convenience and selection in the market, and we will continue to do so by adding premium titles, new packaged sellthrough and other offers to serve our customers. Further, we have a strong brand in Blockbuster Express and, by partnering with established retailers such as Safeway, Publix, and now Bi-Lo, we are in high-quality locations that customers already gravitate toward to shop. This combination makes us the most convenient choice to enjoy a great movie.

Is NCR stopping at 7,000 Express kiosks? If not, what is the unit potential for Express kiosks, including digital units?

We are just under 7,000 Express rental kiosks today and remain committed to deploying up to 10,000 by the end of this year. Our priority is to identify the best locations for our kiosks and the right retail partners, as we believe that allows us to deliver the best experience for our consumers.

Redbox has more than three times the retail footprint, but Express kiosks can be more visually appealing with the dark blue color and 26-inch LCD screen showcasing movie trailers. How do you use that visual appeal as a competitive advantage?

Our Express kiosk is designed to be an automated retail “store.” The machine has the capacity for more than 950 DVDs and has the ability to support Blu-ray and DVD sellthrough in the original retail package. We want our automated retail stores to have visual appeal that re-affirms this is more than just a vending machine.

Our technology allows us to customize the messaging on the LCD display and our touchscreen so that we can collaborate with our partners to create customized promotions that are relevant for our mutual customers in a given retail location or geographic market. This is important as it means we can deliver targeted offers to our consumers in collaboration with our retail partners.

Could a kiosk operator and third-party video store co-exist at the same location?

We are running pilots with various retailers for automated retail solutions because for us, this isn’t just about DVD rentals. NCR is interested in being the global leader in entertainment self-service. We are exploring many different options for delivering entertainment to consumers in and out of home, including digital delivery and by-mail services.


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