Atlanta has always been known for their Southern hospitality and charm. The city boasts four professional sporting teams, a vibrant R&B and hip hop scene and of course peaches that make you drool just thinking about them. With the city being known more for it’s leisurely pace of life, then the breakneck speeds that seem to characterize the tech industry, one wouldn’t think that Atlanta would be at the center of one of the hottest shifts in the movie industry right now, yet the city finds itself in the enviable position of being caught in the intersection of two DVD kiosk rivals in the rapidly changing DVD rental industry.
According to a recent press release, TNR Entertainment has yet again raised the stakes in the DVD rental industry by announcing that they’ve successfully installed 170 new DVD kiosks in the greater Atlanta area.
With Redbox currently beta testing DVD kiosk rentals in Atlanta area Walmart stores and with TNR Entertainment now having completed the first stage of their recently announced expanded partnership with Krogers, consumers lucky enough to live in the Atlanta area, will have two more DVD rental companies fighting for their entertainment buck.
At $1 per DVD rental per night, renting DVDs from a kiosk not only fills the instant gratification factor of wanting to get a DVD right away, but it does so at a very affordable price.
In comparing both Redbox and TNR Entertainment, Redbox has the leg up if customers are bad about returning their DVDs. Redbox caps the maximum price for a DVD at $25 after 25 days, compared to TNR’s $35 DVD purchase price if you keep your movie over 14 days. Redbox also offers online reservations that allow consumers to pre-order movies before going to the store, while TNR is still implementing their own webervation system. Of course with both companies charging the same price, the biggest differential will end up being the convenience factor and with TNR’s Kroger expansion, it will mean that TNR will now have approximately five times as many locations in the Atlanta area.
This convenience factor may be the ultimate test for whether or not Atlanta residents will choose one over the other, but frankly I think the market is large enough to support both. Whether one firm wins market share over the other or whether both companies will see success in their Atlanta endevours remains to be seen, but either way the real winner will be the consumers who now have even more options to choose from in how they rent their movies.
The expansion by TNR Entertainment is only the first step in an ambitious plan to add 1,300 DVD kiosk locations to 25 different markets over the next several months. With the rollout of the new DVD machines now well underway, TNR expects to have their rollout completed by early next year.
Over the last few years, Kroger has been very coy in their experiments with DVD kiosks and have been playing both TNR and Redbox against each other for supermarket contracts. Earlier this year, the company forged a deal with Redbox to add DVD kiosks to their Smith’s subsidiary, but then just six months later they awarded a more impressive contract to TNR for the 1,300 locations in their main Kroger stores. While these moves may represent, a desire on Krogers part to keep their DVD options open, it also could reflect a more optimistic reality that neither TNR Entertainment nor Redbox have the capability to fill all of the demand that they are seeing for their DVD solutions.
With Kroger having over 20,000 potential locations, Walgreens operating 5,000 pharmacies, Walmart adding another 4,000 potential opportunites to the equation and Safeway, who’s been using DVDplay for their kiosks, having another 1,800 stores, you can start to get a sense of how large this industry could really get, just through organic growth amoung existing partners.
If you also consider the potential of what could happen if Starbucks decides the right formula for adding their 8,000 stores to the mix or if Target wants to open up their 1,500 locations to DVD burn on demand kiosks or if McDonalds takes this industry international and puts a Redbox in all 31,000 global McDonald restaurants, then you can start to get a picture of how quickly this industry could actually explode. While not every retailer will adopt the DVD kiosk strategy and certainly not everyone will be incorporating them into every store, TNR’s further expansion into the Atlanta area only highlights the real underlying demand for this technology.
While we haven’t seen much direct competition in the DVD kiosk industry to date, Atlanta may very well be an important testing ground for both Redbox and TNR Entertainment. If consumers in Atlanta embrace both solutions, then it will bode very well for the industry. If we see that the head to head competition actually affects sales, then I expect that we’ll see the equivalent of a modern day gold rush, as both firms rush to stake their claim on each city before their rival gains a foothold. Either way though, I don’t see the expansion of this market slowing anytime soon, which means that consumers across the entire US may soon find a DVD kiosk coming to a neighborhood located near you.
#1 by Michael Webster on November 29, 2006 - 2:03 pm
Davis;
Are the deals basically the same, with the retailer getting a flat fee for renting out the space for the dvd kiosk?
Or is there a sales percentage term which requires monitoring by the retailer?
#2 by davis on November 29, 2006 - 3:18 pm
That’s a good question. I’m not 100% sure, but my impression was that these deals typically involve some sort of percentage payout to the retailers. It could be something like 5%, but I’m not sure why that number sticks in my head.
The real advantage for Krogers is the ability to rent DVDs. People love DVDs, but grocery stores have a huge problem with stocking them because of the inventory issues and the floor space that traditional DVD stores take up. These kiosks are small, effiecient and they can put them by the doors so that someone might make an impulse buy after they’re done shopping, plus then the retailer gets the customer coming back to the store in a day or two. Even if the retailer only breaks even, it’s still worth them giving up 7 square feet of floor space in order to be able to fill the demand at their store instead of someplace else.
My best guess is that a DVD kiosk needs to be in a location where they can rent about 15 DVDs per day, if the kiosk company and the retailer want to profit from the investment. This is harder then it sounds for the neighborhood liquor store, but not impossible for places like Kroger and Walmart.
#3 by Dave Zatz on November 30, 2006 - 2:08 pm
Starbucks… hmmm. I visit Starbucks several times a week, unlike the grocery store which I only visit several times a year. If Starbucks had a movie rental kiosk, I’d probably put it to use!
#4 by davis freeberg on November 30, 2006 - 2:17 pm
With Starbucks brand, I think that they could add kiosks to every restaurant, run a monthly rental program and an online rental program and crush everyone. Not only would they dominate the DVD industry, but they’d sell more coffee too. They’ve been getting more interested in movies, but it seems like they’d rather be more like Red Envelope then Netflix. Right now they sell DVDs, but a pretty limited selection and no kiosks. I think that they will end up being a real wildcard in the DVD rental industry.
#5 by soheil on December 7, 2006 - 2:05 pm
Davis,
With regards to the rev. fee shared by the host (such as the supermarkets); the number initially was closer to the 10% range.
However, with red hot competition to grab the real estate of the big boys (Kroger, Safeway, etc.), it is not uncommon now for the host to command higher fees, not to mention up front “bonus” payments!
As for the number of rentals per day coming from such sites; I believe that it needs to be closer to the 50 range target for the operators.
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