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One Billion DVD rentals served! This is the new McDonald's

September 30, 2010 by Michael Rigato — V.P. of Operations, Signifi Solutions Inc.

In a word, WOW!  Can you imagine a company coming out of nowhere revolutionizing the DVD rental market? Well, it's happened. Redbox has rented 1 billion DVDs.

One doesn't need to look far to see what kiosks have done in the world's marketplace. Ever need money after your bank has closed? The ATM has become indispensable in our society. Have you seen a small independent photo lab lately? The digital camera gave birth to the photo kiosk giving people the power to print their own photos. Have you seen the self-service checkout at your local grocery store and big box retailer? Have you been to the airport? Yes, they have them too. Automated kiosk!

Let's get back to the DVD kiosk. The video rental kiosk had been tried before, but not with a great amount of success. The advent of the DVD made it possible for the kiosk industry to automate the rental of a DVD in the most cost effective way. This gave the consumer quick service, the best price, the most convenient locations and a large inventory of product. Using an existing retail space took away one of the largest costs of a DVD retail store, the brick and mortar building. Having an automated machine took away the second largest cost ... the amount of employees to run the business. The DVD kiosk works because of the relatively low cost of investment and its ability to be placed just about anywhere inside or outside a retail location.  

In less than ten years, this shift in consumer spending has taken out several DVD retail chains plus one giant ... Blockbuster filed for bankruptcy. Even so, Blockbuster made a deal that allows NCR to brand all 2500 plus kiosks in the market today as Blockbuster Express, as well as the thousands to come. This unfortunately might very well be too little to late.  

One would think the DVD kiosk would affect some, if not all, of the small independent and local video stores but not the largest DVD chain in the U.S. By the end of 2010, redbox alone will have deployed 30,000 DVD kiosks in the U.S. market. That number doesn't even scratch the surface of its worldwide potential.

The slow roll from one format to the next always takes time. We've seen this phenomenon happen from vinyl to cassette to CD and from VHS to DVD to Blu-ray. These changes close one door and open another, and at times change how we spend our money. People making their first purchase of a large flat screen TV and the newest Blu-ray player want to get their money's worth. For this reason, an explosion of new kiosks will hit the market. These kiosks will be faster, have larger capacities and there will be multiple method of reserving a movie. They will be much more intuitive. Not merely suggesting a title, but understanding what you like to rent because of what you rented in the past. It will morph into an even better box.  

The kiosk can also dispense another product. The video game! The global video game market is estimated at a whopping $47.5 billion dollars for 2010. Video games can be rented and sold in the exact same way DVD and Blu-ray can, thus extending the lifespan of the kiosk. Halo Reach was released September 14, 2010. Think of the staggering video game cross promotion possibilities if a company had ten thousand kiosk locations at a large retail store. Wrap the entire kiosk with a Halo Reach design and the fusion between sales and marketing is complete.   

I'm not promoting consumers only purchase products one way, because that's not the case either. Consumers want more than one option when making a purchase. In fact, people enjoy brick and mortar, web-based and kiosk options. This choice really is about time, money and convenience.  

That said - should we really be surprised that David has now become Goliath? Not really. This dismantling of the DVD retail chain is very specific. The DVD rental kiosk added a subtle twist of disruptive pricing to the mix. And when all things are equal, a great price for the same product is hard to ignore.

In the end automated kiosk empowers the consumer ... they get what they want, when they want. If it's fast, easy and inexpensive ... customers prefer self-service.
 

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