As kiosks grow, so do players

JUNE 22 | Kiosks offering digital downloads may be on the horizon, but in the meantime, the business of providing physical discs for rental from kiosks has become ubiquitous. In addition to machines from industry leader Redbox, there will soon be thousands of Blockbuster Express machines along with those from competitors DVDPlay and E-Play.

The Blockbuster Express effort is moving along under Alex Camara, the newly appointed VP and general manager of entertainment solutions for Blockbuster Express machine maker NCR, the world's largest ATM maker. Camara was formerly at Coinstar, parent company of rival Redbox.

“There's no shortage of demand for the right technology and the right solution,” Camara says. “This plays beautifully into NCR's sweet spot.” With more than $700 million in the bank and a partnership with the movie-rental industry's most recognized brand—Blockbuster—Camara has reason to be confident.

NCR, which formed its partnership with Blockbuster last year, further sped up its expansion process in April by acquiring the majority stake it didn't already own in TNR Holdings, parent of No. 2 kiosk brand TNR/MovieCube.

Camara has been charged with ensuring that 3,000 Blockbuster Express kiosks will be deployed by the end of the year, with 10,000 in place by the end of 2010.

Though such goals are lofty, the totals still fall short of Redbox, which almost doubled its kiosk count to 12,900 last year and plans to have as many as 22,000 machines by the end of this year.

At stake is market share in a movie-rental kiosk industry driven by $1-a-night rates, which undercut chain stores and draw enough foot traffic to sometimes necessitate more than one machine at some locations. U.S. consumers will boost annual spending on kiosk rentals to $1 billion in 2011 from about $400 million last year, while revenue from in-store rentals will fall 20% to $4.4 billion during the same time period, according to Adams Media Research.

The prospect of such growth has been decried by others in the industry. Netflix CEO Reed Hastings said in April that “the long-term effects of the ubiquitous $1 DVD rental are not positive for us or for the industry as a whole.”

But the success of the kiosk business encourages smaller companies such as DVDPlay and E-Play to continue to grow, broadening the services offered by their machines.

DVDPlay, which operates about 1,200 kiosks and achieved profitability in 2008, plans to make its machines capable of letting customers reserve certain titles online. It's also adding a sell-through component at some of its locations.

E-Play last month began a pilot program in 77 Wal-Mart stores with machines that offer videogame rentals and trade-ins as well as DVD rentals.

And MOD Systems is in discussions with retailers to house machines that allow movie downloads onto SD memory cards.

All of this reflects an industry with enough growth to support more than two horses and with enough complexity to trip up even the most skilled riders, says DVDPlay CEO Charlie Piper. With all the activity, he says, “there's still room for DVDPlay.”