Published:
07-Aug-08
US rental giant Blockbuster and self-service and assisted-service technology specialist NCR Corporation will deploy 50 DVD vending machines in the US on a trial basis in the third quarter of 2008. The Blockbuster-branded vending machines will initially offer DVD rental only, but – according to the official press release – could potentially incorporate digital downloads, DVD retail and video games in future. Locations for the pilot scheme have not been announced, but the companies have stated they aim to install 10,000 vending machines by end 2009.
In a separate initiative, announced earlier in 2008, Blockbuster and NCR are due to install movie download kiosks on a trial basis at two Blockbuster stores in Dallas by end September 2009.
Our take...
US rental vending machines outnumbered Blockbuster store locations in 2007 but accounted for just 2% of total DVD rental spending in the US for the year according to Screen Digest's US research unit Adams Media Research (AMR). However, DVD rental spending via machines increased by 151% year-on-year in 2007 while store-based DVD rental spending fell by 8% over the same period. AMR forecasts that DVD rentals via vending machines will be up 91% year-on-year at end 2008, and by 2012 will account for 10% of total DVD rental revenues.
Blockbuster's foray into this market can therefore be considered a defensive manoeuvre, designed to protect its share of the US rental market. It represents further diversification for the chain as it attempts to address the evolving rental business. The video rental landscape has changed radically since the launch of DVD, particularly in the US, where traditional in-store rental now competes with online DVD-by-post subscription services and a growing DVD rental vending machine business, as well as emerging online movie streaming and downloading propositions. The rentailer has attempted to consolidate its position in both the online DVD rental and in-store markets with online/offline hybrid model Total Access and is soon to re-launch online movie download service Movielink which it acquired in September 2007.
Blockbuster will face some tough competition in the DVD rental vending machine sector. Market leader Redbox is already well established, having installed around 8,400 units to date, and is expected to reach about 10,000 installations by the year-end, thanks in part to a recently-extended deal with Wal-Mart.
Screen Digest and AMR's US rental projections will be reviewed in light of the announcement, however we do not expect the move to have an immediate impact on our forecasts. Since the DVD rental vending machine model relies on a limited number of sites with high footfall, and the existing players already appeared to be well-funded enough to build out all such locations, we believe Blockbuster's involvement will intensify competition for the best locations, rather than dramatically increase the overall size of the kiosk segment.
USA,
