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The DVD kiosk market - The Rise of "The Others"

May 2, 2011 by Soheil Samimi — President, iMOZI

Following in the footsteps of Coinstar's redbox and NCR's Blockbuster Express, which have capitalized on the emergence of the DVD kiosk concept, are a number of new contenders that are actively vying to be recognized as significant players. While the majority of the new operators represent local and regional initiatives with private capital, as well as a broad list of small investors, several looked to offer a public stock opportunity. Obviously, with the success that Coinstar's stock has had over the recent years, it is not too complicated to figure out why such a model would be of interest.

The first such example would be Global Axcess Corp. (Stock: GAXC), based in Florida. After successfully operating in the ATM business, the company has launched what is arguably the third-largest DVD kiosk network in the U.S. today, with more than 400 locations. And while it has been able to demonstrate how an ATM company can successfully transition into new self-service products, recent news on the operations also show the potential pitfalls with regards to the added expertise and sophistication that it takes to operate a large network of DVD Kiosks. In fact, the majority of the issues for the company stem for the limitations of the technology and equipment used to date. However, new leadership is in place and seems confident to turn the corner and continue growth in this new sector for the company.

Another recentl well-publicized launch with a public stock is Public Media Works (Stock: PUBM), based in California. Although some of the initial announcements contained lofty goals in terms of total number of locations projected by the company, the reality is that anyone in this business must contend with the significant capital constraints and quality locations that are absolutely needed to be able to achieve such targeted scale. Nevertheless, the company has recently proceeded to some first deployments involving a couple of dozen stores in California, along with a clever promotional campaign offering Blu-ray movies and selected new releases cheaper than redbox and BlockBuster Express kiosks.

Based in Canada, but with expansion plans for the U.S. market, MediaMatic (Stock: EFLS) is the last company to successfully go public this year in the DVD kiosk business. With already more than 100 kiosks operating in Canada, MediaMatic seems to present audited results showing a profitable operation generating figures that rank it high on the list among all competitors on a per kiosk basis. Furthermore, the company is focused on an advanced digital-media strategy involving movies and music delivered from its kiosks. Currently, an aggressive expansion plan is in place to secure the required capital to scale to hundreds of new stores.

On the private investment side, another start-up called Paradigm Media Resource Group, based in Tennessee has already launched 50 locations this year, with plans for more than 100 additional kiosks being deployed into various retailers across multiple states in the coming quarters. The company has benefited from a growing list of regional grocers and C-store chains eager to finally receive DVD Kiosks, and desiring to partner with a more regionally focused and flexible operating group to best serve their customers.

All in all, what is clear is that the same requirements for success (capital, retail base, operations, etc.) will exist for all contenders looking to tap into regional opportunities and untapped channels where DVD Kiosks have room to grow. The race is certainly on to see which companies will become the No. 3, 4 or 5 recognized DVD Kiosk network in the U.S. market.

And it will be an entertaining development to watch in this growing business.

*Disclaimer: My company, iMOZI DVD Kiosk, is currently a consultant and technology provider to some of the companies listed above...

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