OAKBROOK TERRACE, Ill. -- The DVD rental kiosk, up until now found primarily in grocery stores and at the Golden Arches, appears poised to more aggressively invade other retail channels, including convenience.
Coinstar's redbox is deploying DVD rental kiosks in convenience stores and drug stores, and Blockbuster has begun testing DVD vending machines with retailers and quick-service restaurants (QSRs). Coinstar Inc. and Redbox Automated Retail LLC said that they have placed more than two-dozen DVD rental units in c-stores nationwide, according to a report [image-nocss] by Self-Service World. The companies plan to have 300 in place by the end of 2007, Ray Taddeo, regional vice president of Coinstar, told the magazine.
Consumers can now rent redbox DVDs in 33 Walgreens drug stores in Columbus, Ohio, and 160 Walgreens stores in the Phoenix area. The expansion follows successful rollouts in select Walgreens locations in Chicago and Houston. Walgreens also plans to offer DVD-burning kiosks in some stores next year through Sonic Solutions' Qflix service.
"Walgreens has a proud history of offering some of the most innovative products and services in the drugstore industry, and our Chicago and Houston-area customers have embraced redbox's $1 per night price point and quick, self-service transaction," Robin Randolph, divisional merchandise manager for electronics at Deerfield, Ill.-based Walgreens, said in a statement. "We're excited to provide our Columbus and Phoenix customers with this added convenience."
Taddeo cited high-volume traffic as the main reason Coinstar and other self-service companies are introducing themselves to the c-store industry. "And we know that many of them are DVD renters," he told the magazine.
Oakbrook Terrace, Ill.-based Redbox, located at thousands of McDonald's restaurants and in groceries around the United States, is the nation's leader in self-service DVD rentals, growing from 93,000 rentals in 2003 to more than 21 million in 2006, the report said. It is on pace to reach 40 million rentals this year. Coinstar owns half of redbox along with Oak Brook, Ill.-based McDonald's Corp.
But redbox is only dipping its toe into c-stores, the company said. "Redbox is currently available in a select number of convenience stores nationwide; however, our primary focus remains grocery locations and McDonald's restaurants. Redbox's growth potential is unlimited as we continue to expand in grocery chains and select McDonald's restaurants and explore alternative retail partners," redbox's vice president of marketing Gary Lancina told CSP Daily News. "Redbox is available in convenient locations that consumers are visiting anyway, saving them a stop in their day."
Bellevue, Wash.-based Coinstar also has introduced a financial services kiosk, which currently distributes prepaid cards at a handful of c-stores, Self-Service World said. Future versions of the kiosk will include a bill payment application and money transfer capabilities, said Taddeo.
Earlier this week, Redbox announced that it now has more U.S. rental locations than Blockbuster. Launching 12 locations in 2002, redbox recently installed its 6,000th kiosk, it said in a statement. Dallas-based Blockbuster Inc. has approximately 4,800 U.S. stores, the company said.
"Blockbuster is exploring new and additional ways to provide consumers with convenient access to media entertainment, and that includes exploring the distribution of DVDs through vending machines," spokesperson Randy Hargrove told CSP Daily News.
Last week, Blockbuster began testing vending machines that rent newly released DVDs for $1 a night in Papa John's International Inc. and Family Dollar Stores Inc. locations in Lexington, Ky., reported The Dallas Morning News. Blockbuster Express boxes, each offering 250 movies, are in three Papa John's locations and seven Family Dollar sites, Blockbuster spokesperson Karen Raskopf told the newspaper.
The vending machines may help Blockbuster fend off redbox and DVDPlay Inc. The two companies have been offering $1 DVD rentals at supermarkets, drugstores and McDonald's.
Blockbuster also is testing kiosks outside of Lexington, in fast-food restaurants and other unspecified sites around the country, Raskopf said. She would not confirm where they are. She said Lexington has the largest concentration.
Papa John's, which will have three Blockbuster Express machines in rural towns in another state, said customers will be able to rent the movies when they pick up their carryout orders. They will be not able to get the $1 rental when ordering pizza to be delivered.
"It's a natural affinity," Papa John's CEO Nigel Travis told the Morning News. "You are seeing a consolidation of food and entertainment. It definitely drives traffic."
The c-store industry could be more attractive as a target channel for Blockbuster under its new leadership. The company received an injection of convenience in early July when former 7-Eleven Inc. president and CEO James W. Keyes was named chairman and CEO; he subsequently brought several other former 7-Eleven executives over to the video rental retailer. (Click here to view a CSP Daily News report.)
Keyes told Wall Street analysts at a conference earlier this month that he planned to test several new ideas, including vending machines and, later, kiosks where customers can rent movies or burn copies directly to a DVD. "We think vending is probably the fastest growing segment right now," Keyes said, according to the report.
Blockbuster licenses the vending machines and doesn't own them, Raskopf said. She declined to identify the owner or financial details of the licensing agreement. Rental prices and terms are set by the licensee, she said.
Netflix doesn't see that kiosks will hurt its business, CEO Reed Hastings said in a July conference call. "We see it as competing mostly with the stores because they are new-release focused," Netflix spokesperson Steve Swasey told the paper. "People come to Netflix for convenience, selection and value, and those are really unsurpassed anyplace else." The company offers 90,000 titles.
Family Dollar spokesperson Joshua Braverman told the paper, "A service like this supports our mission of being a compelling place to shop by adding to the value and convenience that our customers expect from Family Dollar."
This isn't the first time Blockbuster has experimented with vending machines, the report said. In 1999, it installed a larger version inside two 7-Eleven stores, one in Oak Lawn and another in North Dallas and outside two Texaco stations in Plano and Dallas. The box was bulky at twice the size of a soft-drink machine because it was dispensing VHS tapes. It held 150 titles, old and new, and accepted only credit cards. It was too early for its time and the test went nowhere, Raskopf said.
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