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Movie Gallery Not Expanding Kiosk Ops

15 Aug, 2006 By: Jessica Wolf

Movie Gallery Inc. is maintaining — but not expanding — its test of DVD rental vending machines — dubbed Hollywood Video Express, but they are starting to attract attention in local communities.

There are about 25 Hollywood Video Express vending machines in operation, many of them in Minnesota, located at Cub Foods grocery store locations at more than dozen cities in the state, including Apple Valley, Bloomington, Eden Prairie, Rosemount and St. Paul.

Cub Foods is owned and operated by the Supervalu Inc., which runs 2,500 stores including other chains such as Albertsons, Bristol Farms, Osco and Savon Pharmacies.

A recent story in St. Paul's Pioneer Press touted the vending machines as competition to Redbox.

Hollywood Video Express vending machines are also reported at Thriftway grocery store locations, a regional chain based in Washington State.

CEO Joe Malugen said in the company's Aug. 10 second-quarter earnings call that Movie Gallery has no immediate plans to launch more machines into more locations.

“We're continuing to look at it,” he said. “It's not fair to say we've drawn any conclusions about whether it's a good long-term business, but we are optimistic about its prospects.

A representative at the company hotline for Hollywood Video Express said within the next month or so, Hollywood Video Express renters will be able to pick up a title at one location and return it at another. The customer service representative also said though there aren't many kiosks in operation, there are plenty of service representatives on call most hours of every day to troubleshoot transactions.

It's a pilot program the company has been decidedly mum about, and Movie Gallery declined to comment for this story. Calls to the Supervalu and Thriftway headquarters were not immediately returned.

However, Movie Gallery interim CFO Tom Johnson told HMR last August that the company had been “experimenting” with video rental machines for a year and a half.

Hollywood Video Express machines carry DVD and video games.

Renters do not need a Hollywood Video membership card to rent from the kiosks, according to the company's Frequently Asked Questions Web page. Also according to the FAQ, the company is looking at outfitting the machines to accept cash transactions.

Rental prices vary and are posted at the locations. Users' credit cards are charged nightly. If a renter keeps a DVD and the charges reach $19.99, the transaction is converted to a purchase. That benchmark is $49.99 for games.

That's similar to competing rental vending kiosk company, Redbox, which currently operates 1,350 Redbox rental machines in McDonald's and select grocery locations in 35 states across the country. Redbox also considers the DVD sold once the rental amount hits $20.

Redbox plans to grow its installed base to 2,000 machines by year's end, said Tim Hale, VP of operations, at the recent Entertainment Media Expo conference in Los Angeles.

Hale also said the company plans to expand into Seattle, home to the Thriftway chain, where Hollywood Video Express kiosks are housed.

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