Rental biz taps booth powers

After fits and starts, movie kiosks catch on in U.S. grocery stores

After numerous attempts to gain a foothold in the U.S., DVD rental kiosks are now flourishing in places like supermarkets and fast-food restaurants.

In fact, even though they represent only a small fraction of the overall DVD rental biz today, kiosk suppliers claim their machines will command 15% of the overall DVD rental market, or about $1 billion, by 2008.

“Kiosks didn’t get serious traction in the U.S. until the last 12-18 months,” explains John Osborne, founder and president of kiosk operator the New Release (TNR). (Space-crunched Europe has had a robust kiosk market for years.)

Now, U.S. kiosk operators Redbox, TNR and DVDPlay are enjoying impressive growth spurts, largely in grocery stores — a space-constrained channel that’s had an on-again/off-again relationship with packaged entertainment over the years, adding DVD sections, then quickly dropping them when banks, pharmacies or flowers seemed to provide more profit.

“But rather than a few hundred square feet, we can do everything in a 4-x-8-foot machine,” says Greg Waring, VP of marketing at Redbox, which is co-owned by McDonald’s and Coinstar. “And you don’t need a video staff.”

A one-night kiosk rental runs between $1 and $1.50, representing about a third of the cost of a typical brick-and-mortar chain rental.

Redbox started renting DVDs through kiosks in McDonald’s restaurants in 2004 and has since installed about 400 machines into the chain. It has almost 1,000 more grocery locations, including such chains as Stop & Shop and Giant Food.

TNR, which is run by former Disney and MGM exec Richard Cohen, is nearing 1,000 locations and has a deal in place to push into 3,000 Kroger grocery spots by 2007. DVDPlay will spread into 1,600 Safeway locations next year.

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