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DVD Vending Expands As Battle For 2nd- And 3rd-Tier Locations Begins; Here Comes Coin-Op

by Staff Reporter
Posted On: 10/27/2010

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vending, vending machine, DVD rental kiosk, self-service kiosk, automated retailing, Redbox, Mitch Lowe, Coinstar, NCR, Blockbuster, Blockbuster Express, Flix Kiosk Co., Signifi, coin-op business, coin-op news, vending operator, amusement machine operator

OAKBROOK TERRACE, IL -- Redbox has announced new video rental kiosk deployment deals with four major convenience store chains, signing with EZ Mart Stores, Fastrac Markets, Murphy Express and VPS Convenience Store Group (Worsley Cos.).

The DVD rental equipment supplier did not say how many kiosks would be deployed at these chains' locations. EZ Mart claims more than 300 stores stretching from Texas to Missouri. Fastrac Markets operates 47 stores in central New York, and Murphy Express runs 58 in 11 southern and Midwestern states. Worsley says it has 382 c-stores and truckstops in the Carolinas and Midwest, operating under the names Scotchman Stores, Young's Stores, Li'l Cricket, Village Pantry and Next Door Stores.

Redbox to date has agreements with 52 convenience store chains nationwide, including 7-Eleven, Circle K, Pantry, ExxonMobil, Kum & Go and Stripes. Its location count is currently 24,000 and the company expects to reach 30,000 by the end of 2010.

In August, Redbox announced agreements with CVS pharmacy locations nationwide, including Puerto Rico, and Longs Drug locations in Hawaii. The 700-unit drugstore rollout is now underway and reportedly will finish by year's end.

NCR Corp., Redbox's main rival, owns and operates 7,000 Blockbuster Express kiosks through a licensing agreement with Dallas-based Blockbuster Inc. It announced in early October that it will expand its kiosk presence in the Southeast after signing a deal to place equipment in all of Bi-Lo's 207 grocery stores in South Carolina, North Carolina, Georgia and Tennessee. The kiosks will replace 168 from competing brands. The Blockbuster Express holds more than 950 DVDs and allows customers to rent them for $1 a night, the same price as a Redbox nightly rental.

Blockbuster Inc. filed for Chapter 11 bankruptcy protection in September and is examining closing more or its brick-and-mortar stores in favor of online and mail-order distribution, as well as vending. NCR is targeting an installed base of 10,000 rental venders by year's end.

Analysts say the two major DVD rental kiosk players already have nailed down most retail chains, which operate 1,000+ stores, so they will likely compete for the next location tier: midsize retailers with locations in the hundreds. Redbox has locked up some of the biggest retail outlets including McDonald's, Wal-Mart and Walgreens. NCR's Blockbuster Express-branded kiosks follow in Safeway, Publix Super Market and QuikTrip grocery and convenience store chains, among others.

The turf that Redbox and NCR have staked out at traditional retailers is a proven market, analysts point out. But what remains to be seen the potential of DVD rental venders at tertiary retail sites and nonretail locations like libraries, universities, transportation hubs and other high-traffic locations.

Two emerging players in the kiosk-based movie rental space are planning to compete with Redbox and NCR by providing equipment and technology to traditional vending and amusement machine operators. Flix Kiosk Co. and Signifi have teamed up to create and offer a turnkey program to help vending and amusement companies get into the DVD rental market on the ground floor [see story].

Both vending and amusement operators already serve a wide range of public locations, and on occasion they have successfully introduced new vending concepts in their markets. A recent example is the placement of ATMs off bank premises. After the national ban on ATM surcharges was lifted in 1996, operators were able to deploy them in their locations and offer cash transactions in their service mix.

Separately, Redbox reached a major movie milestone on Sept. 5 with the rental of its one-billionth movie: "Clash of the Titans," rented from a location in Tampa, FL.

"One billion rentals is an incredible milestone as Redbox has quickly become the local video store for millions of consumers nationwide," said Redbox president Mitch Lowe. "Our popularity is a testament to our consumers' loyalty and our steadfast commitment to making movie rentals affordable and convenient."