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Will digital-download kiosks save Blockbuster?
The home video brand has had a disappointing year, but a partnership with NCR may help keep it alive.
NCR Corp. recently added another notch on its entertainment belt when it announced a test rollout of digital movie-download kiosks with Blockbuster. The NCR kiosks run a digital-download application developed by MOD Systems that, according to MOD CEO and chairman Anthony Bay, allows users to download a full-length movie to a secure digital (SD) card within a few minutes.
"The premise of it is pretty straightforward — it's that people are used to self-service in lots and lots of areas, and this extends self-service to getting content," Bay said. "You have 48 hours once you start watching to watch it, and you have 30 days after you rent it to start that 48-hour period."
In addition to working with Blockbuster, NCR and MOD are testing the kiosks in select Hollywood Video locations. All told, there are six kiosks deployed in Dallas, Seattle and Portland, Ore.
Digital download has been a hot topic in the kiosk industry for some time, and many continue to believe it's the future of self-service entertainment distribution — in fact, Alex Camera, vice president and general manager of NCR Entertainment recently said the technology is a cornerstone of the company's $60 million entertainment strategy.
But with nearly 1,000 store closings just this year and Netflix and redbox rapidly overtaking the home video space, some are afraid Blockbuster's digital download and DVD-rental kiosk strategy may be nothing more than a last-ditch effort to stay alive.
"It just seems like yet another also-ran move for them," said Richard Laermer, CEO of RLM Public Relations and author of "Punk Marketing" and "trendSpotting." This isn't new for the industry. They could have done this a long time ago; they just didn't want to play with the model. Every single time another video company does something, they follow suit."
In fact, Laermer says the only reason the Blockbuster brand has survived this long is because for a time, it had no competition. It's a concept he calls "captive consumerism."
"It's this idea that they have a lot of customers who would have done anything to be somebody else's customer, but nobody else came along," he said. "And as soon as someone comes along, the captive consumer goes there."
Digital download challenges Anthony Bay, chairman and CEO of MOD Systems, knows self-service digital movie download hasn't quite arrived, but he believes the Blockbuster and Hollywood Video test will help make the technology mainstream. The challenge: Media players compatible with SD cards are not commonly used. MOD's answer: Blockbuster and Hollywood Video are offering playback devices to customers who use the digital download kiosk. During the trial, the companies will test different pricing and rental models for the devices. The challenge: Finding the sweet spot. For instance, why place a digital-download kiosk in a rental store, where customers are prepared to rent a physical DVD? MOD's answer: "We are expecting to pilot with a number of retailers over the course of the next 12 months," Bay said. MOD also will test content beyond just rentals. "We're trying different types of retail locations, and we're trying different types of content – rental movies, sell-through movies, TV shows." The challenge: Some movie studios have proven difficult to work with when it comes to licensing content. MOD's answer: "In terms of price points, there's all sorts of debate. No one, I think, debates the value of kiosks. It all comes down to what the economics of that do to the rest of the business," Bay said. "So really what this is, is developing another channel, and in that sense the studios like it, and retailers are interested in it." |
And go there they did. Just last week, redbox announced it has surpassed its own 2009 forecast and now has an installed base of more than 22,000 kiosks across the United States. NCR has revised its Blockbuster Express installation forecast to 3,800 by the end of the year.
Though the consensus may be that Blockbuster is a little late to the self-service game, the company says it still sees plenty of opportunity in the home entertainment segment, and much of it involves expanding on and streamlining the brand's offerings across many different channels.
"We believe there is still significant opportunity in both of these channels (digital download and DVD-rental)," said Michelle Metzger, a Blockbuster spokesperson. "Making the choice among digital offerings will continue to be complicated and confusing for the customer, and we have the ability to interface with millions and millions of customers every month, all looking for entertainment."
Metzger also hints that moving slowly on the DVD-rental kiosk front may have been a strategic measure for Blockbuster.
"In some cases, being second into a market has an advantage, in that you can learn about customer preferences and adjust your commercial model to better satisfy customer needs," she said. "For example, we know that customers want access to a broad range of entertainment choice, and our kiosks have almost double the capacity of our competition, as well as the capability to provide digital downloads."
The digital download capability Metzger mentions may be Blockbuster's saving grace as the home video industry continues to evolve, thanks to the company's partnership with NCR. Just this week, the self-service giant saw its stock soarafter a JP Morgan analyst predicted the company will see a 5-percent growth in sales in 2010, thanks to its Blockbuster Express line of business — even though its flagship ATM and retail activity is expected to remain flat.
And beyond its self-service gravitas, NCR also brings to the table MOD Systems, which focuses exclusively on digital-download technology. NCR became a minority investor in MOD last year.
MOD's Bay says that although there are technology kinks the companies will continue to work out through their trial deployment (see sidebar), digital download may finally be the emergent distribution method the industry has been talking about for years.
"I've been involved in emerging technologies for my whole career, and for the most part, two things happen. People overestimate how quickly (the technologies) happen and underestimate how eventually widely they get adopted," Bay said. "We think we're filling in some pieces that have been missing that are going to accelerate the adoption of digital."
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