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Blockbuster battles Redbox

Vidstore banks on bigger kiosks

Blockbuster is tired of seeing red: The company is gearing up to battle Redbox for a major piece of the video rental kiosk business by installing thousands of its own boxes nationwide this summer.

Through a licensing deal with ATM-machine maker NCR Corp, Blockbuster will roll out 7,000 kiosks branded Blockbuster Express inside supermarkets and outside convenience stores by the end of June, and 10,000 by the end of the year.

It’s a considerable uptick from the 40 kiosks Blockbuster had installed in stores last year, mainly on the East coast, according to Alex Camara, VP and general manager, NCR Entertainment. He is a former exec at Redbox-owner Coinstar.

Blockbuster has aggressively made moves lately to fight back against red-branded rivals like Redbox and Netflix, which have stolen away a significant number of video renters over the years with $1-a-day kiosks and DVD-by-mail services.

NCR, based in Duluth, Geor gia, is running Blockbuster’s kiosk biz, managing the boxes, which includes stocking them with DVDs. It splits revenue earned from the kiosks with Blockbuster. In effect, NCR is paying Blockbuster to use its name to market the service.

Like Redbox, Blockbuster’s kiosks offer DVD rentals for $1 a day. But the boxes have also been designed to also sell DVDs starting in July, giving it another revenue stream, and eventually expand to offer videogames, music and book sales.

Given the growth in the kiosk biz, NCR could increase rental fees to $2 for new releases, with older fare still available for $1 a day.

The kiosks are also larger than Redbox’s and are able to hold 950 DVDs; each box usually offers 300 titles to rent. Redbox offers 500 discs.

In addition, customers can rent three movies at once and log onto BlockbusterExpress.com to browse available titles at local kiosks and reserve movies for pick up at a specific machine. If a title is unavailable at one machine, a nearby kiosk which has the movie is identified.

Site was launched in part to reduce wait times at kiosks as customers search for movies. So far, the company’s found that 20% of its customers browse online and half of those reserve their DVDs for pick up.

Blockbuster had to do something. Once the dominant player in the video rental biz, Blockbuster found itself in a vulnerable position, up against newcomers that took advantage of technology to deliver videos to consumers who didn’t have the time to visit the traditional video store.

Kiosks will account for 30% of the DVD rental market this year, according to research group NPD.

“When you’re onto something good and customers are reacting to it you want to provide it for them,” said Mike Britton, general manger of Blockbuster Express.

Blockbuster’s initial moves into these segments of the business were far less aggressive than its rivals.

Redbox currently operates 20,000 kiosks (which generated $774 million for Coinstar last year), while Netflix has grown to 14 million subscribers, who pay at least $9 a month to use the service.

The expansion of Blockbuster Express is part of the company’s embrace of a variety of platforms outside of relying solely on traffic to its stores, including pushing its DVD by mail service and Blockbuster On Demand, a video-on-demand service through cable providers. It’s introducing a games by mail rental service soon.

“Different customers want to get entertainment in different ways,” Britton said. “We want to be the preferred choice for everybody and realized we need to be in locations that are generally more convenient.”

The kiosks also will enable Blockbuster to continue operating in areas where it’s been forced to shutter stores. Blockbuster will close 1,000 stores this year to deal with a billion-dollar debt load and declining rental business.

NCR has quietly been growing its own entertainment business.

The company is best known for building ATM machines for banks and the boarding pass printing and check-in machines airlines use at airports. It started adapting its tellers to handle entertainment two years ago, spending $60 million to develop its Blockbuster Express kiosks last year and another $80 million this year.

It acquired California-based kiosk operator DVDPlay last year, which also has machines in Colorado and Illinois, and started locking down deals with retail chains like Safeway supermarkets and discounter Dollar Tree. It started converting the 3,800 kiosks it operated to Blockbuster machines last year.

NCR last week said it will soon start introducing digital download kiosks in 57 InMotion Entertainment stores operating at 35 airports across the U.S., including Atlanta, Chicago and Seattle in May. The kiosks will offer travelers movies, TV shows and music tracks to rent or purchase and download to memory cards and sticks.

For movie rentals, consumers will have 30 days from purchase to activate the movie and 48 hours to watch once they begin.

The digital technology will eventually be integrated into Blockbuster Express machines.

The Blockbuster Express kiosks were designed to eventually offer digital downloads, something Redbox is also considering offering soon. With digital, new content can be delivered to a kiosk by the corporate office at the press of a button.

The modern airport traveler has limited and often inflexible options for entertainment on the go,” Camara said. “DVDs and CDs cannot be played on many portable devices. Movies and music can be downloaded to portable devices at home, but once travelers leave home, purchase options have been limited. Streaming content often cannot be accessed in the air, and never without expensive fees. We are bringing faster and easier entertainment choices to consumers while they are on the go.”

Blockbuster thinks it has the potential to dominate a sector of the video rental biz it’s been late to and is pitting much of its success on its brand.

The large blue kiosks with Blockbuster’s logo emblazoned clearly stand out to passers by, and the company sees them as billboards.

“Everybody recognizes what Blockbuster means,” Britton said. “You know immediately what it is.”

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