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Physical Rental Hangs On

1 Apr, 2013 By: Stephanie Prange

A few years ago — heck, even a year ago — not many people would tell you it was a good investment to buy a house. The market was broken. There were more shoes to drop. More foreclosures were around the corner. Likewise, the physical rental business was on the ropes. Who would want to rent a disc when digital delivery was the future?

Like the housing market, which is returning from the dead, physical rental is getting some votes of confidence and rising from the ashes — albeit in a different form. Analyst Eric Wold, of Los Angeles-based B. Riley & Co. sees a future in physical rentals at kiosks.

“We continue to believe there is a large group of consumers that prefer and will continue to prefer renting DVDs or Blu-ray Discs for a number of understandable reasons: the large cost differential between DVDs and VOD, a lack of appropriate broadband access, or a desire for the better quality and enhanced content of Blu-ray versus downloads (i.e., alternative endings, additional features, etc.),” Wold wrote in a March 25 note.

He sees kiosks, especially Redbox, as a beneficiary of consumers’ continued appetite for physical rental. As stores close and Netflix continues to de-emphasize its physical business, causing those subscribers to turn elsewhere, a Redbox kiosk, he believes, will be physical rental consumers’ destination of choice. (It also doesn’t hurt that the kiosk company has dipped its toe in the digital water with its Redbox Instant by Verizon service.)

Meanwhile, the Blockbuster U.K. chain   was saved from the dead by a British private equity firm, which Wold suspects may help revive the kiosk business there. Redbox has machines in storage with the Blockbuster name already emblazoned on them by their previous owner, NCR. And Redbox would like to expand internationally.

Redbox isn’t going away, and it has smoothed over much of the rancor with studios via windows and better (non-litigious) relationships. Just last week, Redbox announced the extension of its deal with Universal.

Yes, physical rental is hanging on, at kiosks and at the remaining stores that serve a clientele who prefer to watch content on disc.

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About the Author: Stephanie Prange

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