March 24, 2005

DVD Movie Rental Prospects

Self-service movie rental: will DVD kiosks take off?

by Michael L. Jones, contributing writer 15 March 2005

Greg Hyde thinks renting a DVD should be as effortless as buying chips from a vending machine.

He envisions one day installing a string of Box Office Express DVD-renting kiosks in convenience stores and colleges across Louisville, Ky. But before Hyde can realize his DVD rental empire, he must get the public to use the two machines he has today.

"Right now, Im losing money trying to get people to catch on," he said. "I guess its like the first time you swiped your ATM card in a money machine: You were a little wary."

The 7-foot tall Box Office Express holds up to 720 DVDs or videogame discs. Using a credit or bankcard, customers can rent a disc for three days for $2.99 and $1 for each additional day.

Last summer, Hyde placed his kiosks in a busy C-store and a high-end athletic club in the suburbs. The arrangement called for the host business to get 10 percent of the profits from the DVD rentals.

So far, so good. But Paula Bader, owner of the C-store, had her machine removed in early January.

start quoteWhat you have with our machine is a video store without the overhead.end quote

-- Bob Tollini, sales director
Video Access Computers

"I pulled the thing out of my store after four months because I wasnt making any money," she explained. "There are better things I can do with the space it was taking up."

Hyde purchased his kiosks through American Entertainment Distributors, a Florida company that specializes in franchise businesses. The two machines cost Hyde a little more than $32,000 each. He figures hes invested $80,000 so far, but is willing to spend more because he believes in the concept.

"Im going to give it another six months to a year," he said.

In retrospect, Hyde realizes Baders store was a bad location for the Box Office Express. The food mart is located near a cluster of bars and a commuter school, in a downtown known to roll up the streets at night.

"Baders has heavy traffic, but it doesnt get a lot of repeat traffic," Hyde explained. "The machine needs to be somewhere where a person knows theyll be back in three days."

Bob Tollini, sales director for Video Access Computers, said trial-and-error lessons like Hydes are being learned across the country everyday. VAC, a subsidiary of Wisconsin-based V & L Tools, manufacturers the DVD rental kiosks that Hyde owns.

"This industry is only a year or two old," Tollini said. "People are still sorting everything out. Its like the ATM. When the first ATMs came out, people used to just stare at them. Then they saw more of them. Once ATMs were everywhere, people started using them. Its the same with the kiosks. People need to see them."

Tollini said his company sold 100 kiosks last year and are on track to surpass that number this year. Other customers have had success with the kiosks on college campuses, military bases and in super markets near residential areas.

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Posted by Craig at March 24, 2005 03:08 PM