Article
Self-service movie rental: will DVD kiosks take off?
With the growth of Netflix and the decline of Blockbuster stock, many analysts are predicting a wrap for the traditional rental model. Enter the kiosk. Read about one deployer's experience with the electronic sequel to the video store.
Greg Hyde thinks renting a DVD should be as effortless as buying chips from a vending machine.
He envisions one day installing a string of Box Office Express DVD-renting kiosks in convenience stores and colleges across Louisville, Ky. But before Hyde can realize his DVD rental empire, he must get the public to use the two machines he has today.
"Right now, I'm losing money trying to get people to catch on," he said. "I guess it's like the first time you swiped your ATM card in a money machine: You were a little wary."
The 7-foot tall Box Office Express holds up to 720 DVDs or videogame discs. Using a credit or bankcard, customers can rent a disc for three days for $2.99 and $1 for each additional day.
Last summer, Hyde placed his kiosks in a busy C-store and a high-end athletic club in the suburbs. The arrangement called for the host business to get 10 percent of the profits from the DVD rentals.
So far, so good. But Paula Bader, owner of the C-store, had her machine removed in early January.
-- Bob Tollini, sales director |
What you have with our machine is a video store without the overhead.
"I pulled the thing out of my store after four months because I wasn't making any money," she explained. "There are better things I can do with the space it was taking up."
Hyde purchased his kiosks through American Entertainment Distributors, a Florida company that specializes in franchise businesses. The two machines cost Hyde a little more than $32,000 each. He figures he's invested $80,000 so far, but is willing to spend more because he believes in the concept.
"I'm going to give it another six months to a year," he said.
In retrospect, Hyde realizes Bader's store was a bad location for the Box Office Express. The food mart is located near a cluster of bars and a commuter school, in a downtown known to roll up the streets at night.
"Bader's has heavy traffic, but it doesn't get a lot of repeat traffic," Hyde explained. "The machine needs to be somewhere where a person knows they'll be back in three days."
Bob Tollini, sales director for Video Access Computers, said trial-and-error lessons like Hyde's are being learned across the country everyday. VAC, a subsidiary of Wisconsin-based V & L Tools, manufacturers the DVD rental kiosks that Hyde owns.
"This industry is only a year or two old," Tollini said. "People are still sorting everything out. It's like the ATM. When the first ATMs came out, people used to just stare at them. Then they saw more of them. Once ATMs were everywhere, people started using them. It's the same with the kiosks. People need to see them."
Tollini said his company sold 100 kiosks last year and are on track to surpass that number this year. Other customers have had success with the kiosks on college campuses, military bases and in super markets near residential areas.
DVD renting kiosks are popular in Europe, where they are appreciated because they use so little space. But the industry is coming to America at a precarious time for the DVD rental business in general. According to a recent Wall Street Journal article, shares of Blockbuster have fallen 50 percent since May 2002. The Internet, video-on-demand, and rent-by-mail services like Netflix are challenging the traditional video rental model. Could Hyde's business be obsolete before it gets a chance to mature? Tollini thinks not.
"I've been reading about video-on-demand since 1987, and you know video stores are still here," Tollini said. "What you have with our machine is a video store without the overhead. And I'm not worried about Netflix, either. What we are talking about is basically an impulse buy. If someone decides they want to watch a movie, they are more likely to want to see it that day rather than wait five days for it to come in the mail."
Hyde believes success is just a matter of marketing and finding his niche audience. He still hasn't found a new home for the kiosk that was pulled out of Bader's, but that's only because he's being more careful this time.
"I've got ideas for promotions and memberships," he said. "There are all types of things I plan on trying. I work at the Ford Motor Company, which I call my security blanket. I can be a little patient."
