September 09, 2010

Are the days of the $1 DVD rental kiosks numbered?

Analysts at J.P. Morgan apparently think so, saying ongoing growth of kiosk vending, spearheaded by Redbox and Blockbuster Express, among others, will soon be undercut by burgeoning growth of streaming and video-on-demand (VOD)

Report: DVD Rental Kiosks to Decline in 2012 |

By : Erik Gruenwedel | Posted: 09 Sep 2010
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Indeed, VOD, which has been little more than an afterthought for the past 20 years, is lately getting the significant support from major studios, cable and satellite operators, and related consumer electronics manufacturers and retailers.

Major retailers Walmart, Best Buy and Sears, in addition to Amazon, Blockbuster and Apple, have launched or expanded VOD services. Netflix, which has created considerable buzz for its streaming service, is launching a standalone streaming service in Canada this fall. Amazon is reportedly set to bow its own subscription-based streaming service in the fall as well.

Studios see VOD as a margin-accretive alternative to DVD/Blu-ray Disc rentals, in addition to replacement revenue for declining package media sales.

“We believe adoption of online video streaming and downloading services will accelerate dramatically in 2011 … and be promoted by major retailers,” J.P. Morgan analysts wrote in the August report. “DVD kiosk revenue opportunity [as a result] will peak in 2011, owing to loss of share of the home entertainment market to the online video services.”

Dan Rayburn, principal analyst with Frost & Sullivan, said Coinstar-owned Redbox is vulnerable to an influx in digital distribution, including streaming, because their current business model revolves around packaged media.

“They have no digital offering. … They are in a hard spot,” Rayburn told, alluding to the fact Redbox cannot deliver content directly to the television.

Coinstar, of course, is working to develop digital distribution that could involve both its kiosks and the Internet.

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Posted by staff at September 9, 2010 06:35 PM