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Blockbuster to Deploy DVD Rental Kiosks

4 Aug, 2008 By: Erik Gruenwedel

Blockbuster Inc. Aug. 4 will roll out 50 branded DVD rental kiosks in the current quarter, with plans for 10,000 units installed over the next 18 months.

The Dallas-based DVD rental giant earlier this year with Dayton, Ohio-based NCR Corp. began locally testing kiosks that dispensed discs and have the capability to offer digital downloading, DVD movies and video game sales in the future.

Blockbuster and NCR said in a joint announcement that the kiosks will feature NCR's assisted-service technology.

Blockbuster, which has long expressed a desire to explore the kiosk market on its own terms, is following the lead of kiosk pioneers DVDPlay (1,300 kiosks), Redbox (6,000) and TNR Entertainment (2,000).

Analysts project DVD vending kiosks could grow by more than 60% over the next three years, increasing from 9,300 units at the end of 2007 to more than 22,400 by the end of 2010. Additionally, consumer spending on movies from vending machines during that same period is expected to grow from $197 million to more than $760 million.

“This initial rollout provides consumers increasingly convenient access to their favorite movies and is one more step in the fulfillment of our mission to transform Blockbuster into a multichannel provider of media entertainment,” said Jim Keyes, Blockbuster chairman and CEO.

Last year, Chuck Berger, CEO and president of DVDPlay, said he welcomed the arrival of Blockbuster into the kiosk market.

“It means kiosks are going to be a big part of the marketplace in the coming years,” Berger said. “It validates the industry.”

Michael Pachter, media analyst with Wedbush Morgan Securities in Los Angeles, said Blockbuster is looking to substantially reduce its retail footprint as it tries to contain costs.

“The [Blockbuster] brand has enough equity to do this if they play it right,” Pachter said. “It really depends on the experience the consumer gets and how aggressive Blockbuster moves to retrain the consumer to the new rental model. People don't change that easily.”

Rob Enderle, independent analyst with The Enderle Group in San Jose, Calif., said Blockbuster-branded kiosks will undoubtedly accelerate closure of company-owned stores, but not entirely replace them.

“I don't see kiosks substituting the in-store experience, but I see them as a supplement,” Enderle said.

Blockbuster reports second-quarter (ended June 28) results Aug. 7.

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