Redbox's Blackbox

Company testing new-DVD sell-through kiosks

OAKBROOK TERRACE, Ill. -- Redbox Automated Retail LLC is poised to expand a test of sell-through machines offering regular-priced DVDs as a complement to its popular $1 a night rental kiosk business, according to a report by Video Business. The company is currently testing dedicated sell-through kiosks under the brand Vidigo in five locations in Los Angeles. Titles, spanning new releases and catalog, are tagged between $19.96 and $20.95. The Vidigo kiosks are the same size as Redbox kiosks but colored black, said the report.

Redbox will soon add to the test smaller [image-nocss] sell-through machines scaled to tight quarters such as convenience stores, president Mitch Lowe told the magazine. Redbox already has spread many of its rental machines into the convenience channel.

The kiosks can be found in or in front of Wal-Mart, McDonald's, 7-Eleven, Circle K, Walgreens and other retail, supermarket, convenience store and drug store outlets. And following agreements with Albertsons supermarkets in June and Kroger supermarkets in August, Redboxwhich generated $389 million in revenue in 2008 and currently has 15,000 kiosks nationwideexpects to end this year with 22,000 kiosks in all 48 mainland states, up 61% from the end of 2008. Company parent Coinstar Inc., Bellevue, Wash., said that revenue from the DVD rental operation could double to as much as $780 million.

It placed its kiosks in all 248 Albertsons stores. Kroger said Redbox kiosks are currently available at more than 200 of its locations, and more than 2,600 Kroger-operated supermarkets and c-stores will feature the kiosks within the next year. (Click here for previous CSP Daily News coverage of Redbox.)

Redbox's push into sell-through comes at a time when the company is facing heat from many studios who believe the $1 a night rental model is biting into their film revenue, said Video Business. Starting later this month, 20th Century Fox Home Entertainment and Warner Home Video will begin distributing titles to Redbox about a month after they street widely elsewhere to better preserve their DVD sales business. Universal Studios Home Entertainment has imposed a 45-day delay on titles to Redbox since last year.

However, Redbox executives are circulating a study, conducted this month by Interpret, that indicates that Redbox renters are not cannibalizing studio sales business, and in fact are heavily supporting it.