Hollywood’s major revenue generator – the DVD retail market – is under attack from a range of DVD rental kiosks, primarily the Redbox line of rental kiosks across North America. With film revenues dwindling and long-term rental rates, particularly from retail outlets, falling quite dramatically, Hollywood have begun an all-out offensive against the kiosk-based businesses.

Online rental company Netflix recently signed a 28-day delay contract with Hollywood’s largest studios, ensuring that films have a fair run on DVD before being brought online as a streaming product. With Redbox and other kiosk-based rental services facing the same delay, it appears that Hollywood’s cartel-style release strategies could result in lost earnings for kiosk companies.

However, Redbox is keen to fight back. With growing revenues and a potentially revolutionary business model, the ever-growing kiosk DVD rental company plans to offer a video streaming service to complement their kiosk-based rental outlets. Available as a paid monthly service, Redbox believe that the online service could potentially beat out rival Netflix and DVD rental outlets such as Blockbuster.

Whether the strategy will succeed or not is unknown. However, with Redbox’s recent success disrupting Hollywood’s retail strategy, it appears that almost anything is possible in the exciting kiosk industry.

Global Axcess Corp, an independent ATM provider with more than 4,500 machines, are branching out into the self-service market with a line of DVD-rental kiosks in 2010.

CEO George McQuain, who has largely been responsible for bringing the once-struggling Global Axcess back to profitability, says they have a unique opportunity to compete against the major DVD-rental brands.

“We believe there is a largely unmet addressable market for DVD kiosks that will not only allow us to penetrate the market but also allow us to displace incumbents,” McQuain said in December. “Our goal is to leverage our ability to deploy, manage, maintain and process transactions from a wider range of self-service kiosks beyond the traditional ATM. We believe our aggressive move into the DVD kiosk market has significant upside revenue growth opportunities for us.”

During 2009, kiosk revenue grew 94%, with the Redbox-dominated channel approaching $1 billion in revenue. Kiosk rentals were more than enough to offset a 3.2% decline in rentals from brick-and-mortar outlets such as Blockbuster and online sectors.

With stiff competition from 2009 sensation Redbox, Blockbuster CEO Jim Keyes said yesterday that the future of the Dallas-based DVD rental company hinges on its ability to position the brand across multiple distribution platforms – or it might not be a happy ending for Blockbuster.

“The next 12 to 18 months are going to be very challenging,” Keyes said. “We are building a multichannel platform approach and at the same time we have brand new competitors (namely Redbox and Netflix) certainly taking some of the demand out of the market.”

“The great opportunity for Blockbuster is to adapt to the different use occasions, because that’s what these kiosks represent,” he said.

The CEO said Blockbuster has the option to close additional stores, a strategy he said the media blew out of perspective last year when it focused on the closure of 1,000 stores through this year while failing to mention the addition of 10,000 Blockbuster kiosks.

“The net increase for Blockbuster’s presence in 2010 was actually 9,000 additional points of presence, via kiosks,” Keyes said.

Not many industries can count 2009 as even a decent year, considering the gloomy economic downturn that struck fear into suits all over the world, but the kiosk business is one of them.

It’s natural that deployments have been put on hold because of tight credit and companies have been forced to “trim the fat” as they struggled through the global recession, but kiosk developers with compelling value propositions have reaped the benefits of cost-conscious deployers and consumers alike.

Two of the obvious self-service superstars of 2009 are Coinstar and redbox, who have never had a better year, all because they made consumers an offer they cannot refuse, especially when times are tight. Coinstar, in particular, is of course directly tuned into those who are looking to save money by converting their copper shrapnel pennies into pounds.

Whereas Redbox have recently posted impressive statistics for their DVD rentals throughout 2009, renting out over 450 million DVD’s.  Many believe the economic climate has resulted in an increase of customers; this seems likely considering their $1 a night rental service.

More importantly, however, more deployers are becoming convinced of self-service’s lasting positive impact on their bottom lines. Self-checkout deployments continue to grow because retailers simply cannot ignore the rise in customer satisfaction and the dip in labour costs that follow deployment.

The same can be said for airline self-check-in, photo kiosks and patient self-service, to name a few. It’s not often that an innovation that benefits a retailer so dramatically also pleases consumers and improves their experiences at retail. Thanks in part to a financial landscape that has forced some tough decisions, more and more retailers continue to realize that self-service does just that.

Over the past 12 months the DVD rental industry has been at war with major entertainment corporations about the pricing of renting movies to the public through kiosk systems.

Many of the major entertainment corporations like Fox and Warner Brothers have tried to hold back on the delivery of rental DVD kiosks to companies like RedBox due to the price being just $1 per rental, as they don’t see the benefit to them.

Now the competition is on between the rental companies who are competing to offer the best deals to their film loving fans.

This week Blockbuster has announced the rollout of 2,500 Blockbuster Express $1-per-day movie rental kiosks through the end of the year, which includes partner/owner NCR Corp. acquiring content, not through Blockbuster, but from DVD distributors and third-party retailers.

Speaking at a recent Pali Capital conference call, Blockbuster CEO Jim Keyes said the Dallas-based No.1 DVD rental service is receiving a license fee (from 1% to 10%) for use of the Blockbuster name and that NCR is supplying Express kiosks with content acquired through distributors such as VPD and Ingram Entertainment and retailers such as WalMart.

Some of the biggest summer box office sales are due to be released onto the high street over the next few months, and sparks are already flying. Entertainment corporations, Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment have implemented 28-day, 30-day and 45-day windows, respectively, for their new-release product distributed through kiosks.

“For Blockbuster, that is a real consumer conundrum,” Keyes said. “How do you present the brand value that you want the brand image that you want and constantly disappoint customers?” 

The CEO is looking into various ways of gaining the right brand image by changing the price (from $1-$3) for new-release content, which represents 80 per cent of Blockbuster’s business.

“[We are] proactively working on diversifying our content,” Keyes said.

This kiosk war between the multi-national companies proves how fast kiosk deployment is growing in the current market. As businesses try to reduce staff costs, they are also looking for new ways to improve customer experience, hence the installation of DVD rental kiosks in supermarket and retail stores.

However, the battle between the entertainment corporations is a prime example of how many companies are reluctant to adapt to the current economical climate and the need for convenience.

While many DVDs sell at cheaper prices, the top selling box office films still price in at around £13 which is expensive in this day and age and don’t meet consumer requirements.

The move to a kiosk fulfilled environment is still a long way off as major corporations need to adapt to the consumer market but as this begins to happen, then the move will be a lot quicker and beneficial for all.

In recent weeks, DVD rental Kiosk Company have filed a law suit on 20th Century Fox over the movie studio’s attempts to delay its titles from appearing in Redbox vending machines.

The lawsuit, filed in US District Court in Wilmington, Del., marks the latest escalation in a fight over Redbox’s services, which has divided Hollywood Studios.

And just recently, we have seen Fox, a unit of News Corp, join the General Electric Co.’s Universal Pictures to try and preserve a more lucrative DVD retail sales by keeping movies out of Redbox’s $1-per-night rental kiosks for some period after they go on sale.  

Fox ordered its wholesale distributors to stop supplying Redbox until 30 days after movie discs are released for sale, with the policy to take effect from October 27th 2009. 

A similar law suit by Redbox against Universal is set to be ruled very soon by a judge in Delaware after Universal insisted on a 45-day delay.

These lawsuits are in a protest against the low prices Redbox charge for renting DVD’s. The giant entertainment companies who make millions of pounds each year on films believe that more and more people will turn to the Redbox Kiosks to watch the film for just $1 instead of purchasing the film at the standard retail price, usually in the £10-£15 region.

Redbox, which began in 2002 as a way for McDonald’s Corp. to expand beyond burger business, has 17,900 self service kiosks in the US and plans to install another 8,500 this year. Netflix Inc CEO Reed Hastings has said Redbox and other low-cost kiosk renters such as DVDPlay Inc would be the biggest competitors to his mail-order DVD rental company by year’s end.

Some studioshopping to ride Redbox’s growth have shown willingness to bargain. Lions Gate Entertainment Corp. agreed to make their films available immediately.

This deal followed Sony Corp.’s agreement to provide its movies for kiosks, as long as Redbox destroyed copies after their rental lives ended rather than sell them as “previously viewed”. Because Redbox’s used-disc purchase price of $7 is generally lower than what Blockbuster Inc. and others charge, the studios worried that fewer people will want to buy new copies at regular prices typically £10 or higher.

The disputes over supplies so far haven’t affected movies available through the self-service vending machines. When studios balk, Redbox has bought new releases from retailers rather than wholesalers, a tactic that may keep customers happy but also cuts into profit margins.

In the suit, Redbox accused Fox of violating antitrust laws by “reducing consumer choice in the marketplace and increasing the prices that consumers must pay.”

Redbox, a subsidiary of Bellevue, Wash.-based Coinstar Inc., said Fox is seeking to “strangle” its low-cost rental option to “prop up an artificially high pricing scheme.”

“We were forced to sue Fox after many discussions,” Redbox President Mitch Lowe said Wednesday. “Essentially they gave us an ultimatum of either delaying the movies from our customers starting in October or forcing us to raise our prices.”

Studio spokesman Chris Petrikin said Fox would have lifted its 30-day delay request if Redbox had agreed to improved financial terms, but the sides could not agree.

“This lawsuit aims to limit Fox’s ability to make legitimate business decisions, and Fox believes it will prevail in defeating Redbox’s merit-less claims,” Petrikin said in a statement.

This problem that Redbox has faced has put them in a potential crisis and in the badbooks of their top suppliers, which is not the best position to be in.

If you are thinking of installing a self service kiosk in your business it is essential that you learn and understand the importance of keeping a good rapport with your suppliers as well as keeping your customers happy.

However, in these circumstances Redbox had no choice but to take the matter further as the delay on receiving the DVD’s would potentially affect their profits and overall sales.

If you are to sell products or services through your self service kiosk, make sure that you sign a contract with your suppliers ensuring that there will be no changes to distribution, supplying etc.

Despite the fact that a kiosk will help improve sales in your business, it can have a negative affect if you don’t liaise with your manufacturer, suppliers and distributors properly.

At Protouch, we are dedicated to ensuring that you receive a high standard of service when choosing yourself service kiosk. There is a lot of work involved but Protouch will guide you along the way to choosing the best kiosk system to suit your needs and requirements.

For more information visit Protouch today.