No Stop to the Kiosk Invasion

29 Jun, 2009 By: Stephanie Prange

Redbox has invaded my neighborhood. I first saw the red invasion while selling Girl Scout cookies with my troop a few months ago. The Redbox rental discs made a lot of trips in and out of the Albertson’s during our two-hour booth sale. Then, this weekend, one of my neighbors mentioned renting a Redbox disc for the first time. This is a neighbor who would formerly peruse Wal-Mart and buy several discs a year, rather than rent.

It wasn’t too many years ago when I first noted another red invasion: red envelopes. Suddenly, my neighbors were renting discs from Netflix, despite being less than a mile from both a Hollywood Video and a Blockbuster store.

At that time Neflix was considered a niche market by No. 1 rental goliath Blockbuster. A few years later, Netflix was eating Blockbuster’s lunch.

Once again, a phenomenon that many dismissed as a niche business is becoming a threat to the core.

“By the end of the year, kiosks will likely be our No. 1 competitor,” Netflix CEO Reed Hastings said in a recent conference call. “There are already more kiosks in America than video stores.”

Blockbuster (as it did with online rental) got to the kiosk party somewhat late in the game but now is clearly viewing kiosks as important to the future of the business. Its kiosk partner, NCR, recently bought out kiosk company TNR.

“We believe NCR’s acquisition sets the stage for aggressive growth and will further our goal of deploying thousands of Blockbuster Express branded kiosks,” said Blockbuster CEO Jim Keyes.

Wal-Mart has installed both Redbox and e-Play kiosks. And just last week, news came that sellthrough stalwart Best Buy joined the kiosk market, testing e-Play kiosks that can buy, rent and sell DVDs, Blu-ray Discs and games.

All of this could reignite animosity that the studios have occasionally harbored toward rental. At least one studio, Universal, is embroiled in a lawsuit with Redbox. Recently, a kiosk executive told me studios consider his business “toxic.”

When sellthrough goliaths such as Wal-Mart and Best Buy get into the rental business, studios will have to take even greater notice. Sellthrough is their bread and butter. It fuels the revenue that underpins the whole theatrical business.