Spring start for download-to-burn kiosks

But major hurdles include how price, content licenses

By Jennifer Netherby -- Video Business, 2/16/2007

FEB. 16 | Kiosks that burn DVDs on demand in stores are expected to begin rolling out to retail on a trial basis this spring, but there are still hurdles to clear.

The DVD Forum last month approved technical specifications for a new type of recordable disc for use with in-home and in-store burning of CSS-protected movies. Download-to-burn kiosks could now potentially allow retailers to add thousands of movies to their inventory without stocking the physical product and even replenish copies of sold out DVDs.

How content will be licensed for such kiosks and how retailers will pay for them are still being worked out, however.

Major studios are in negotiations for kiosk download deals, but none have yet reached an agreement with retailers or kiosk makers.

“Sonic is not directly involved in these discussions, but the feedback we get is that content protection is the missing link,” said Tim Hogan, VP of digital distribution platforms for Sonic Solutions, which earlier this year launched Qflix download-and-burn software for kiosk makers and movie download providers. “As the last of these hurdles is cleared, we think you’ll see the content.”

Pricing models for downloaded movies also are holding up deals.

Studios want to charge DVD wholesale prices for kiosk downloads, but some kiosk makers, including Polar Frog Digital, would prefer a revenue-sharing model. Polar Frog CEO Todd Rosenbaum said the price should be different because the retailers are paying for the blank discs and manufacturing costs.

“If we’re paying for the product to make the goods, we feel there should be a price variance,” Rosenbaum said.

Polar Frog already has some kiosks at retail offering movies from smaller suppliers such as Magnolia Home Entertainment. The company plans to begin testing kiosks that use CSS in June.

Major retailers, meanwhile, are negotiating directly with studios to license content for download via kiosk.

MOD Systems, which makes music download kiosks used at Starbucks, hopes to launch its machines at retail by the fourth quarter, CEO Mark Phillips said.

“The technology will be there by mid-year; whether or not retailers bring it in is another story,” he said.

Phillips said start-up costs are holding some retailers back. MOD slashed its price by two-thirds to $1,000 for a kiosk to make it more palatable to retailers.

Kiosk makers are mum about which retailers they are in discussions with but say they are targeting a broad range of channels from drug stores to bookstores. Drug chain Walgreens is one early proponent of kiosks.

Qflix allows retailers to manage and market their virtual inventory, which MOD’s Phillips said is another issue for retailers used to working with physical product.

“Retailers are only now getting good at selling online,” Phillips said.

Retailers are expected to use kiosks to increase the number of titles they carry and to refill their DVD stock if they run short on a film. But that’s only the beginning of what kiosks offer.

Retailers and kiosk makers plan to offer consumers a whole new range of DVD options, separate from what they might find on a pre-burned DVD. They plan to offer users the option to make their own compilations of TV shows and even mix and match different TV shows on one disc. Other ideas include allowing consumers to pick the DVD extras they want to go with a movie or to include a copy that can play on a portable video player.

How kiosks are integrated into stores also could give retailers a reach into consumers’ homes and the movie download market. Sonic’s Hogan said some retailers plan to operate the movie kiosk similar to how they now operate photo departments in the era of digital cameras. Consumers could order a movie online from a retailer’s Web site and either download a copy or pick up a burned copy at the store or even have it shipped to them.

“What we’re finding is the early implementers are really helping to pioneer a new approach for the industry,” Hogan said.