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Blockbuster Move Validates Kiosks

27 Nov, 2007 By: Chris Tribbey

Chuck Berger, CEO and president of DVD rental kiosk operator DVDPlay, wasn't disappointed to hear that Blockbuster might start throwing its weight around in the kiosk market.

Far from it.

“I'm actually excited by this in a number of ways,” he said. “It means kiosks are going to be a big part of the marketplace in the coming years. It validates the industry.”

As it did Netflix for by-mail rentals, Blockbuster is following the lead of kiosk operators DVDPlay (1,300 kiosks), Redbox (6,000 kiosks) and TNR Entertainment (2,000), giving movie rental kiosks a trial run at Family Dollar and Papa John's pizza stores.

Movie Gallery, before it declared bankruptcy, was testing its own line of DVD rental kiosks under the Hollywood Video label. The company had plans for nearly 300 of the kiosks in supermarkets and malls, but the initiative is up in the air due to its financial troubles.

Blockbuster's move, however, gives the concept another push.

“It sure makes me feel a lot better about getting into it,” said TNR Entertainment CEO and President Tim Belton. “It validates what we're doing.”

Greg Kaplan, CEO of Redbox, which recently placed its 6,000th DVD rental kiosk in the market (giving it more U.S. locations than Blockbuster, according to the company), said he could not comment on Blockbuster joining the kiosk game.

“I can tell you that Redbox continues to expand and gain market share as more and more consumers embrace the value and convenience we provide,” he said.

Dubbed Blockbuster Express, the kiosks hold 250 movies, and are being installed at stores in the Lexington, Ky., area. DVDs rented at the kiosks can be returned at any other Blockbuster kiosk location. The company is testing the kiosks at other fast-food locations in the nation, and is looking at potential download-to-burn options.

“Blockbuster is transitioning from being a place for DVD rental to being a brand that enables customers to get their media entertainment however they want,” said Blockbuster spokesman Randy Hargrove.

Blockbuster CEO James Keyes, in an interview with Bloomberg news service, said it's the right time for his company to join the DVD rental kiosk game.

“We think vending is probably the fastest-growing segment right now,” he said. “The next, bigger trend is for vending, and we are well positioned to be able to play through an electronic kiosk.”

But DVDPlay's Berger said Blockbuster could learn from other kiosk operators, should Blockbuster go full steam ahead. “I think the way they're approaching it shows they have a lot to learn,” he said, noting that the kiosks Blockbuster is operating hold far fewer DVDs than those operated by the major operators.

Blockbuster is hinting that space concerns may not be much of a worry in the coming years.

“Our strategy calls for us to restore our rental DVD business, both in-store and by mail, facilitate an in-store transition from rental to retail, and position the company for an eventual transformation from DVD to digital delivery,” Hargrove said.

TNR's Belton said technology, studio support and consumer acceptance are all still in the way of download-to-burn kiosks becoming a major factor.

“I certainly don't think it's a short term reality,” he said.

DVDPlay's Berger agreed download-to-burn is a great idea, but not close to being a viable option for any of the DVD kiosk operators.

“My belief is that the studios are far away from having thousands of retailers having (the studios') property on hard drives everywhere,” he said.

“It's not practical yet.”

Berger also said he thinks Blockbuster's choices of where to test the kiosks are odd.

“Grocery stores and fast food restaurants are the places to do it,” he said. “The real measure is how often do people go there … it's only convenient if people go there several times a week.”

But Chris Sternberg, a spokesman for Papa John's, said his company's previous success with DVD — most recently with offers revolving around King Kong, Superman Returns and Spider-Man 3 — made the decision to give Blockbuster Express a trial run an easy one.

“We just started implementing them, so it's too early to see the results,” he said, adding that three Lexington stores have the kiosks, with another three being installed during the last week of November. “For us, pizza and entertainment go hand in hand, and all our previous [DVD promotions] have been winners. This was a logical extension for us.”

TNR's Belton said he thought Blockbuster “hit the two areas that ... are important,” namely grocery and take-out dining. “Grocery is the cornerstone of our deployment.”

As for having a rental giant like Blockbuster joining the kiosk game, none of the competition said they felt threatened.

“They won't push anyone out,” Belton said. ‘Blockbuster is a formidable player in the industry, but kiosks are not going to get them out of the brick-and-mortar model they're in now.”

Redbox's Kaplan didn't seem concerned either.

“The Redbox service is unrivaled by any services currently available or on the horizon,” he said.

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