Blockbuster tries to address $370 million debt

Redbox has installed its first two movie-rental kiosks in Manhattan, marking its effort to build sales and brand awareness in the largest U.S. market.

The move comes just a day after movie-rental competitor Blockbuster hired law firm Kirkland & Ellis for advice on how to address about $370 million in debt scheduled to expire in August. The company said it will discuss its attempts to refinance the debt during its earnings call later this month.

Redbox has led growth in the U.S. kiosk industry, which is expected to expand over the next few years as video store chains such as Blockbuster and Movie Gallery close underperforming stores. Redbox boosted its machine count to a current 12,900 from 6,550 last year through agreements with chains such as Wal-Mart and Walgreens and will install as many as 8,000 new machines this year.

Last November, Blockbuster reduced its fiscal third-quarter loss by 48% with an increased focus on videogames, consumer electronics and rental profitability. The company also announced plans to deepen its commitment to digital delivery and is testing Blockbuster-branded DVD rental kiosks in response to Redbox’s growth.

In Manhattan, Redbox added its $1-per-night rental machines in the Walgreens stores at the Empire State Building and at One Times Square. According to Redbox’s Web site, area kiosks were preiously limited to Shoprite stores in Jersey City and Hoboken, New Jersey as well as an indoor machine at a Brooklyn Stop & Shop.

Despite the fact that is virtually the only growing retailer of DVD and Blu-ray, Redbox’s $1-per-night rental model does not sit well with many Hollywood studios. The company is suing Universal for the studio’s attempt to impose a kiosk window that would provide Redbox access to movies 45 days after the general DVD release and limit the kiosk operator’s ability to sell used disc rental inventory.

Danny King is a reporter for Variety sister publication Video Business.

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