DVD Kiosks Target DVD Rental Market

DVD kiosks located in supermarkets, fast-food restaurants and other high-traffic locations will expand their share of the rental market to 20% to 25% within about three years, predicts the chairman and CEO of No. 3 kiosk operator DVDPlay.

DVDPlay leader Chuck Berger told VB that kiosks—operated primarily by Redbox, TNR Entertainment and DVDPlay—currently hold about 2% of the roughly $8 billion rental market. He estimates the channel’s share will grow to more than 5% in 2008 and more than 20% by 2010 or 2011, on dramatic growth in the number of kiosks in operation.

He said DVDPlay in 2008 plans to add about 2,000 kiosks to its current base of 1,300 machines. Across the channel, about 8,000 new kiosks could be put into operation next year, he said.

Leading kiosk marketer Redbox has more than 4,000 stores, and TNR has about 2,000.

The kiosks will build their market share at the expense of bricks-and-mortar retailers, which now own 80% to 85% of the market, Berger said.

Blockbuster, the largest rental retailer by far with more than 30% market share, actually estimates kiosks already hold 3.4% share for 2007. According to Blockbuster estimates, physical stores have already given up share to kiosks, Netflix and video-on-demand, which the chain includes as part of the rental market. The exception is Blockbuster, which has grown its share slightly since 2004 through a combination of in-store and online rentals.

Blockbuster is planning a foray into kiosks and is believed to already have some in operation. Movie Gallery earlier this year opened a small number of kiosks under the Hollywood Video brand.

Berger allowed that the channel’s growth “could be in partnership” with existing rental retailers.

Kiosks success formula so far has a mix of high-traffic locations and low prices—rentals are about $1 a day.

“The person we’re going to attract is the person who is not motivated to go out of their way to rent a DVD—or to take back a DVD,” Berger said.

DVDPlay will take a leaf from bricks-and-mortar rental stores’ books in the new year, however—it plans to begin selling previously viewed discs through its kiosks about four weeks after street date.