News

McDonald's wades deeper into DVDs

May 24, 2004

DENVER-McDonald's, in an effort to become the first fast-food chain to rent top DVDs nationally, is placing Redbox DVD kiosks inside and outside of Denver area McDonald `s restaurants this summer, according to a story in USA Today.

For $1 per day customers can rent the same top 30 DVD titles as the major video stores carry.  The top 30 titles account for about 80 percent of all DVD rentals.  Aside from the price, another benefit is that the videos can be returned to any McDonald's-at Blockbuster, DVDs cost $3.99 for three days and must be returned to the same store.

According to Mats Lederhausen, managing director of McDonald's Ventures, the chain is not trying to put Blockbuster out of business, just trying to be more contemporary and lure more business during slow dinner hours.

"We are doing everything we can to be more relevant with everyday consumers," Lederhausen said.

It's a very crafty-if not sensory-move for McDonald's, says Valerie Folkes, chairman of the marketing department at the University of Southern California. "They just want people to get inside, where they're subjected to the smell of those french fries. It's going to sell more food."

That is all McDonald's wants. Lederhausen says he doesn't expect to make money from DVD rentals.

McDonald's has long declined to share real estate with other businesses. This forces it to learn a new business. "It could blur the brand image," Folkes says.

But it poses far more trouble for Blockbuster, whose parent, Viacom, has plans to spin it off.
How to compete with McDonald's - besides on DVD selection?

"Well," Folkes says, "I don't think you'll see Blockbuster selling burgers anytime soon."