Should Blockbuster buy Redbox?

That's the question that NewTeeVee's Chris Albrecht asks in a recent post at the site's blog. While Blockbuster clearly needs to do something to avoid getting further eviscerated by Netflix and a host of others, their current plan to build a set-top box and allow direct download video rentals might not be the right course to take at this point. After all, as Albrecht notes, "getting into the hardware game will be an expensive endeavor, especially in an increasingly crowded field already packed with big names like Apple, TiVo, Xbox 360, Vudu and soon the Netflix LG box."

Instead of going that route, what about picking up Redbox, whose self-service kiosks are already deployed to over 6,800 sites across the US? He makes a pretty interesting case for the plan:

Going out into the real world to download something may seem like an unnecessary step, but it’s actually more of a transitional one because it combines elements people are already familiar with.

First, people still go to video stores. In adding these kiosks to their real-world locations, Blockbuster would bridge the the familiar experience of browsing the aisles for a movie with the more unfamiliar one of digital delivery.

Second, by using existing set-top services like TiVo, people wouldn’t feel like they have to buy a new device, or worry about buying one that will die quickly (read: HD DVD).

Finally, by leveraging the existing Redbox kiosks in non-video locations like grocery stores, Blockbuster could take advantage of impulse renting. People are already used to the idea of DVDs being sold in supermarkets, this would nudge them a little further and into downloads.

I don't think a lot of marketers realize just how difficult it is to break people of their habits. I also get the feeling that too many of them don't fully understand that when people are out shopping for one thing -- say shampoo or cereal -- they're primed to be on the lookout for other things, even other unrelated things, hence the appeal of Redbox's kiosks in all sorts of different retail stores. This is just my personal opinion, but Blockbuster buying Redbox makes a lot more sense than trying to launch a VOD product or buy Circuit City, which was their new (yet definitely not improved) plan as of this morning.

Tags: kiosks, redbox, blockbuster

Can burn on demand DVD kiosks save Blockbuster?

That's exactly the question that this article at Seeking Alpha asks about the movie rental giant. After all, we know that the DVD rental kiosk market has picked up considerably from the days when early pioneers like RedBox were testing out the business model. Yet, while some estimates indicate that we'll have over 10,000 of these devices in the US market by the end of 2007, the country's largest video rental retailer has been notably absent from participation. But rather than missing out on an "obvious opportunity," Seeking Alpha suggests that they may instead be passing up this wave of self-service devices in favor of the next generation terminal: a kiosk that would allow patrons to burn limited-time-use DVDs from a catalog of thousands of titles. The article speculates:

To a certain extent, Blockbuster will be interested in using the burn on demand kiosks in order to minimize real estate and cut down on employee costs, but the real benefit of the kiosks will be the new franchising opportunities that will open up to them. As the video store industry has gone into consolidation mode, Blockbuster’s franchisees have had a very difficult time adjusting to the new rental environment. Disagreements over the online program and the end of late fees has even caused one of their first franchise owners to sue Blockbuster for breach of contract. As the market has collapsed, attracting new capital has been difficult and Blockbuster has struggled in replacing this lost revenue.

Hardware and maintenance costs and licensing/security issues loom large as potential sticking points, but I really liked Seeking Alpha's notion that eventually Blockbuster's stores will look more like a Kinkos, with rows of terminals that can quickly produce any movie from a new blockbuster release to older, more obscure titles that don't often see the light of day (thank goodness for Netflix).

I'll say this: DVD rental kiosks make money. That industry as a whole has bucked the trend and once again proved that consumers really put convenience above all else. Fundamentally, burn-on-demand kiosks should play in the same space. However, CD burn-on-demand kiosks haven't fared as well, since it's fast and easy to download music right to a home PC. That's not the case (yet) for movies, but will it be enough to get consumers to embrace them? With a larger catalog of available titles, it would seem like a burn-on-demand kiosk would have more potential opportunities to reach out to increasingly fickle consumer audiences. But at the same time, the added cost and complexity of the devices could drive up rental prices or drive down overall profitability. (If you're new to the kiosk world you might want to take a look at WireSpring's series of pages and articles about kiosks).

Tags: Blockbuster, burn-on-demand, DVD kiosk