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New Player Enters Video Vending Market

18 Apr, 2003 By: Holly J. Wagner

Displaying a big sign that says “Touch Me!” may sound like a salacious invitation, but the folks at DVDPlay hope the invitation is just sexy enough to get DVD and video game renters to use their machines as an alternative to a traditional video store.

The company was formed in 1999 to develop the technology for the Internet-connected rental vending machines it calls “AEMs” — Automated Entertainment Machines. The idea was that consumers are already comfortable getting money from ATMs and would transition easily to getting not just cash, soda or candy bars, but other goods from machines.

The goal is not so much to replace traditional rental outlets, but to fill in gaps of time and geography that put video rental out of some people's reach.

DVDPlay has a few points that differentiate it from other video vending machine companies. For one thing, two of its corporate officers, Douglas Kinney and Don Webb, are former Blockbuster Video executives.

The company also uses a franchise model. A potential franchisee must have at least $250,000 in assets to get a territory and at least $100,000 of that must be liquid. The franchisee — so far DVDPlay has just one, in Houston — commits to a minimum of 10 machines to get started but may set prices and late fees. The company guarantees it will prevent internal competition, but it has no way to preclude other video vending machine companies like V&L Tool or Video Access Computers from encroaching on the same turf.

The software that drives the AEM does more than just manage inventory. It can also manage Internet-based customer service and loyalty programs.

“After the first rental, a credit card number is on file and the consumer can check the nearest machine online beforehand to see if the disc is available, then reserve a title at that machine,” Cravens said.

It also allows some remote monitoring and troubleshooting, a feature that's bound to interest some storebound entrepreneurs.

“If you have wireless connectivity you can manage this from the beach,” Cravens said. The machines also offer secondary revenue opportunities through LCD screens that can carry national or local advertising.

Each machine can hold just 102 units. But, said Cravens, “It's a matter of purpose. We did it so the footprint can go almost anywhere. We are about impulse and convenience.

“We are taking it closer to where the customer works, lives or plays.”

The plan is to offer about 20 new releases per month, four deep per machine.

None of the analysts who study traditional video rental and sellthrough channels are tracking video vending machines yet.

“One thing that I would question is that video rental is a little bit more of a social and interactive process than I think most people are aware of,” said Barry Sosnick, analyst for Adams Media Research. “They spend about 15 minutes looking at the video shelves. A lot of times people carry the boxes with them as they walk the video walls.”

A video vending machine, he said, “just strikes me as contrary to the way people shop.”

So far the machines have been tested in Duane Reed drug stores in Manhattan, N.Y. , the USC and UCLA student unions in California and The Pantry gas and convenience store chain, which has 1,274 stores in the southeastern United States.

Cravens concedes video vending machines are not for every situtaion, but he sees opportunity anyplace that generates lots of consumer foot traffic.

“We have one in a hospital that has 900 employees. We are talking to two large chain stores that want to free up space devoted to DVDs,” he said. “We are talking to stores that want to take the DVDs off the shelf to sell that space to the potato chip guy.”

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