Archive for category Kiosks

Zoom Kiosks Hacked – Hackers Can’t Resist Free iPods

Jan 16

Posted by Davis in Kiosks, Technology | 9 Comments

BacklightOne of the major advantages to using kiosks at a retail store is the reduction in shrinkage that retailers see, once they introduce kiosks at the retail level. Because customers have to actually pay for a product before they can get their hands on it, vending can save retailers significant amounts of money by reducing the amount of theft from shoplifters and unscrupulous employees. Like anything though, if you give someone enough incentive, people will always figure out a way to get around theft deterrent systems.

When I was a kid, people took the time to figure out a way to short circuit Coke machines into giving away free sodas, by spitting water into the slot for dollar bills. Considering that Zoom systems is catering to a much higher end of the retail market with their iPod and cell phone kiosks, it shouldn’t be much of a surprise that hackers have already figured out a way to get around the theft protections built into the Zoom vending machines.

Because Zoom is using internet explorer to run their kiosk software, hackers have figured out that it’s relatively easy to bypass their security protections by accessing the file explorer window and then tricking the machine into thinking that you’ve already paid.

Since most of the Zoom’s kiosks are either inside of a Macy’s location or in an airport, this limits the effectiveness of this hack because there are still security guards that can watch out for this, but this hack could still undermine the usefulness of kiosk technology, if you have to have physical security monitoring the machines. While I’d be surprised to find out that Zoom hasn’t already responded to this threat by making it more difficult to gain access to the file explorer window, this hack still highlights an important issue for kiosk manufactuers to consider when designing their vending solutions.

By removing an actual human from the transaction process vending can save time and money for many businesses, but without the right theft controls, it can also expose retailers to even higher levels of theft. Even with this exploit, I would still be willing to bet that retailers see significant less shrinkage with Zoom kiosks than without them, but for a technology that depends upon removing humans from the transaction process, these sorts of exploits are a significant threat to the kiosk industry. If retailers can’t feel comfortable in having an unmonitored vending machine selling their inventory, it will greatly diminish the appeal and convenience that vending can have as a retail solution.

Single Zoom Kiosk Sells $55,000 Worth Of iPods In Just 1 Month

Dec 28

Posted by Davis in Kiosks, Technology | 3 Comments

Hot ProductHot Product Hosted on Zooomr

Setting the gold standard for the kiosk industry, Zoom Systems has revealed that they’ve taken in $55,000 worth of iPod sales from just 1 vending machine at an Atlanta airport over a single month. This is an amazing amount of revenue from a kiosk and may offer a glimpse at how we’ll see high end electronics sold in the future.

Earlier this week, Sanford Bernstein said that they estimated that Apple earns about $4,000 per square foot at their retail stores each year. While this is an impressive number in it’s own right, if Zoom can replicate this type of volume for a full year, it would mean that they have the potential to earn $20,000 in income for each square foot that they take up.

I’ve seen these Zoom kiosks in action and while they don’t dispense DVDs, they are certainly unbelievably hot. Consumers love them and want to try them out, just to use them. The machines are simple enough to use, consumers pick out the type of iPod or accessory that they want, put in their credit card and then the machine gently gives them consumer electronic love. The whole process is actually easier and more enjoyable than a traditional retail transaction and Zoom doesn’t have to pay their robots overtime.

Over the last year, Zoom raised $10 million in round C funding and another $35 million in round D funding just six months later. With a very hot kiosk design, an emphasis on high end retail and backing from investors like Goldman Sachs and Motorola, Zoom is well positioned to lead the kiosk industry from snack foods to luxury goods.

DVD Play Fast Forwards Into Arizona

Dec 16

Posted by Davis in Disclosure - I own stock in co. mentioned, DVDs, Kiosks, Netflix, Technology | Comments off

DVD Play is the oldest of the DVD kiosk providers, but also one of the smallest. While the company doesn’t have nearly as many kiosks as Redbox or TNR Entertainment, they do have an important agreement with Safeway to provide DVD rental machines to their stores. According to their website, the company currently has approximately 170 machines, mostly at Safeway locations. All but one of these machines are located in California.

DVD Play’s system is set up very much like the other DVD kiosk players, except they use smaller machines and charge more for their rentals. Their machines only hold 500 discs and they typically offer between 25 – 50 movie choices at any given time. Recently, I asked the Safeway manager near my house about how popular the machines were and he estimates that they rent about 20 DVDs per day from his location. Because the DVDs are $1.50 for the rental and $1.00 for each day after, it means that they need to rent less to be profitable. If DVD Play demonstrates success at these price points, it will be a good test case in how elastic DVD rentals are, once you increase the price over the $1 per night.

One thing that was clear from my conversation with the Safeway manager was that he was really happy to have the machines in his store, regardless of the number of rentals that they achieve. He felt like it added to customer satisfaction and that it gave the store something that they haven’t been able to offer before. In a news article from the Payson Roundup, he’s clearly not the only manager who feels this way. In the article they reveal that DVD Play has started their expansion outside of California and is now rolling out kiosks in Northern Arizona and they also discuss some of the less tangible benefits that Safeway is seeing as a result of this rollout.

“We don’t own or service the kiosk,” said Dan Dillon, Safeway store manager. “We have a contract with the company that does own it, but we’re glad to have it. This is just one more convenience for our customers. People can pick up their prescription, grab some flowers, get a coffee at Starbucks, and then a movie — all in the same ten minutes.”

When looking at the DVD kiosk market, there are really two different customers that need to be served. There is the consumer, who ultimately rents the DVD, but then there is also the retailer who is providing the floor space for the machines. In watching the growth of this industry it’s become clear that retailers like these machines even more then the customers do. Renting DVDs can be a real pain for a grocery store. It takes staff, inventory systems and precious floor space. On the other hand, putting a DVD kiosk near the exit of a store barely takes up any floor space, needs little servicing and has it’s own automated inventory system built in.

Recently, DVD Play hired Dennis Lucas as an Executive Vice President. Lucas was a brillant acquistion for the company and previously had spent most of his career working his way up the corporate ladder of the Albertson’s organization. Just like Netflix depends upon the postal system to act as a distribution partner, the kiosk companies use grocery stores to act as theirs. With Lucas’ extensive background in the grocery industry, he brings skills that will prove invaluable in how DVD Play is able to better serve their grocery partners and demonstrate these less tangible benefits. I see hiring Lucas as being akin to when Netflix hired the former postmaster general to act as their liaison to the post office. While it’s still early for Lucas at the company, I have high expectations for what he can bring to the operational side of DVD Play’s business, as well as to the negotiation table.

DVD Play’s expansion into Arizona makes a lot of sense from a geographical standpoint and could represent a real turning point for the company. DVD Play was founded in 1999 and while they’ve seen slow but steady growth, it’s been anything but explosive. While the company may have gotten off to a slow start, more recently things have been progressing quite nicely for them. At the end of 2004, things looked pretty bleak, but in 2005 the company saw a 200% growth increase and by the end of 05′ they had rented over 4 million DVDs. In 2006, growth has continued to accelerate and they added another 1 million DVDs to this total in the first six months of this year alone. This works out to be an average of approximately 32 DVDs rented a day from their machines.

With the pickup in volume, DVD Play conducted a second round of VC financing and raised another $20 million to help fund further expansion. This brought the total capital that they company has raised to $40 million.

The company plans to use this capital to expand into 1,000 locations by the end of 2007 and has previously said that they would target California, Texas and Florida as ideal locations for this growth.

While DVD Play may have gotten off to a slow start, their recent success and their expansion into Arizona is another clear signal that the DVD kiosk industry is strong, healthy and growing. While I don’t fully understand why it has taken consumers so long to embrace this technology, it’s clear that consumer habits are changing and that more and more businesses and people are becoming comfortable with using kiosks. As video stores continue to come under pressure from a variety of competition, the DVD kiosk will serve an important role in capturing customers who still want instant gratification, at a fraction of the cost of operating a full scale retail store.

TNR Entertainment Hires IBM To Support Aggressive Growth Plans

Dec 12

Posted by Davis in DVDs, Kiosks, Movies, Technology, TV | Comments off

With DVD kiosks leaving their infancy years and beginning to approach their toddler years, TNR Entertainment has found that managing this growth has become increasingly difficult. In an attempt to help position the company for more scalable growth in the future, TNR Entertainment has announced that they have hired IBM to support the company over the next several years.

With retail partners moving past the beta phase of DVD kiosks and into the deployment phase, TNR needed a solid backend system that could help them tie all of their machines together and IBM is a natural fit. The multi-million dollar contract will initially run for three years and will enable TNR to focus on aggressively developing their business without having to worry about the constraints that their growth might have to their infrastructure. In a press release announcing their implementation of IBM’s MySAP program, TNR gives some of their rationale behind wanting to outsource their backend software needs.

“At the beginning of the year, we realized that, with our major growth initiatives underway and the tremendous amount of data flow inherent in our business, our systems didn’t have the management tools we needed, now or for the future. IBM was able to quickly assess our needs, develop an IT infrastructure and manage it for us,” said Jay Whitney, vice president of operations for TNR Entertainment. “With the on demand hosting model, we can focus our efforts on expanding the business without having to invest in an entire IT infrastructure from the ground up.”

While taking care of these backend needs will undoubtably solve some of the major headaches that TNR Entertainment faces from a business perspective, from the press release it’s unclear if it solves two of the major pieces that the company is missing from a consumer perspective.

Currently TNR Entertainment lacks the ability for consumers to reserve DVDs via the web. TNR has acknownledged that they’ve been working on a solution to this problem and IBM may or may not be able to help with that process. One thing is clear though and that is without webervations, it will make managing upcoming burn on demand technology very difficult from a logistics perspective. While it’s still early in the DVD kiosk cycle to get too excited about burn on demand functionality, recent comments by Time Warner CEO Dick Parsons and an agreement by the DVD Forum to support this feature in 2007 indicate that the technology is well on it’s way towards being accepted by the major media players in the upcoming year. If IBM is able to assist in tying together the backend inventory with an online inventory that consumers could use, it would go a long way in improving the quality of service that TNR Entertainment is able to give their customers.

The second missing piece of the TNR consumer equation is their inability to accept returns at a different kiosk then the one you rent from. While I doubt that most people take heavy advantage of this feature, it’s certainly a nice bonus for those who are taking long road trips and want to swap DVDs or for those who have several different kiosks that they come across during their daily activities. While the press release does not explicity state that this functionality is coming, it’s reference to better inventory management makes me suspect that this could also be something the IBM may be able to assist TNR Entertainment in developing.

With TNR’s kiosks holding 200 titles and a total of 1,000 DVDs, managing inventory can be an especially crucial component of maintaining a consistent quality experience for their customers. While they want to maximize the turnover on their inventory, they also want to ensure that there will always be plenty of choices for customers when they rent from their kiosks.

Near my house there is a DVDplay kiosk located within a Safeway and the last time I counted there were only 68 films in their inventory and at least forty of them were sold out. While this is a small indication as to how successful these kiosks can be even at a $1.50 price point, it’s also a little dissappointing for someone who has gotten used to being able to browse through Netflix’s deep longtail archives for movies that appeal to my niche tastes.

Whether or not IBM’s software addresses either of these consumer issues for TNR certainly doesn’t negate the importance of this announcement. By outsourcing this functionality of their growth the company can concentrate on more important issues like securing distribution agreements and finding more capital to help them accellerate their growth. With VOD eventually set to replace the DVD, TNR Entertainment only has about a decade to establish their brand as a premium player if they want to make the jump to an all digital world. By leveraging IBM’s expertise, they’ve put themselves in a position to deploy their kiosks even more quickly and to manage their network of mini video stores regardless of how quickly or large it seems to grow.

Til Death Do Us Part – Getting Past The 7 Year Digital Itch

Dec 6

Posted by Davis in DVDs, HDTV DVDs, Kiosks, Media, Movies, Technology | 2 Comments

During the throes of the tech bubble, Time Warner became enthralled with a little ole internet company known as AOL. At the time, technology was hot, the markets were robust and the media company was eager to take a stab at digital distribution. While Time Warner didn’t know about the blood bath the tech market was about to face, in 2000, they started a romance with AOL and by the end of the year, their lovefest would ultimately consumate in a merger that has proved to be one of the most costly marriages in the history of the financial markets.

At the time, the merger seemed to make a lot of sense. AOL had a growing internet business. Time Warner had a dusty library of archived content that they were eager to release. By combining both companies, they could create synergies that other media companies couldn’t match. The result however, turned out to be nothing more then disasterous and when AOL officially changed their name back to Time Warner, they all but admited that their tech experiment had gone terribly terribly wrong.

Fast forward to 2006. Time Warner has managed to completely transform their company. They’ve ended their walled garden approach and albeit kicking and screaming, they’ve led the other studios in embracing various digital strategies. With 2006 having brought about a profound revolution in online video, Time Warner has given notice that 2007 will usher in big changes for the company’s film strategies.

On Tueday, Time Warner CEO Dick Parsons, sat down with investors at the Credit Suisse Media and Telecom conference and gave a remarkably candid assesment of his company and their plans for the next year. In his conversation, he discussed the format wars, the competitive landscape of the telecom markets and perhaps most importantly, Time Warner’s digital plans in 2007.

In regards to the format wars, Parsons offered very little hope for consumers who would love to see this silly little battle end. When asked about the potential for the PS3 to be a leader in the HDTV market, Parsons downplayed it’s importance and told the audience that the HDTV flat panel displays would be the real driver for HDTV content growth.

“The format war is unfortunate almost by definition. Because it creates confusion in the minds of consumers, it doesn’t allow a big group to line up behind either one of the formats and begin to drive the costs down so these platforms are going to be out of the reach of the mass market. I mean what is the PS3? Like $600 bucks or something like that? However, even there, I think we’re positioned to take advantage of what uptake there is on the new devices because we’re one of the few studios, if not the only one that is putting out stuff out in both Blu-Ray and HD-DVD.”

While I admire Time Warner for being one of the only studios to be format agnostic and leave it to consumers to decide which is the superior format for the future, I nonetheless disagree that this war was inevitable. The only reason why we haven’t seen broad support for both formats is because of greed. Rather then trusting the markets to decide, both Blu-Ray and the HD-DVD camps have attempted to gain a monopoly on the format and it has clearly backfired as a result.

In discussing Time Warner’s cable assets, Parsons shrugged off concerns about competition from the telecoms. He pointed out that even where FIOS has been deployed, the telephone companies have been acting rationally and are already raising rates in an attempt to profit even after a very limited deployment. While he confessed to not knowing how far the telephone companies would take this video war, he was less then optimistic on satellite’s long term chances in the mix of things.

“If you talk to the guys who really sort of understand, at a profound level, the sort of technological space we’re moving into, a Gates or a guy like Eric Schmidt, and they are the guys who have told me that ‘Geez Dick, you guys with Time Warner Cable’ or I’ll say the same thing with Brian [Roberts] and his cable platform, ‘you don’t understand how far ahead of the rest of the market you are with your platform, it is just that much more robust, it’s going to take these other guys 5 – 6 years to catch up, if they make the investment.’ It turns out they’re right. The cable platform is, in terms of delivering bytes into the home and giving functionality to all of the things you can now do in a digital world, it is just four, five, six years ahead, in terms of it’s robustness and it’s capacity to deliver the telco platform and unless somebody invents something that doesn’t exist today, it will be permanently ahead of the satellite.”

Over the years, we’ve heard an awful lot of noise about FIOS, yet here we are today and there still is less then 1 million households subscribing to fiber in the US. While this is clearly important to the telephone companies, it won’t easily replace the cable systems that have developed over the years. In the long run consumers will benefit from being able to choose between one or the other, just like they benefit from choosing from DSL or cable internet access today, but Parsons may be right that the future of everything on demand may be much further out then anyone expects. While this would undoubtably help Time Warner as a company, I can’t help but feel just a tad disappointed, that the technology is still so far behind where I wish it could be.

After Parsons’ presentation was over, he opened up the conference to a question and answer period. This has always been my favorite part of financial events because often times, this is where the biggest bombshells are released and this event was no exception. When asked about the narrowing of digital release windows between downloads and DVDs, Parsons offered up far more information then I was expecting and mentioned that 2007 will likely be the year that we see burn on demand technology make it’s way into retail stores.

“I think that you’ll see next year, our studios and possible others, going to a download to burn format. The reason we haven’t done it yet is because this has to be worked out and done in cooperation with our existing channel of distribution, I mean you don’t wanna go around the people you’ve been working with in terms of builiding this business at this point in time, so we’ve just seen Walmart for example, go with these little kiosks, it’s all experimental now, these little kiosks in the store where you can actually go and have a download to burn experience instead of having the physical disc and if we do this right, it’s a win win win for everybody. It’s a win for the distribution channel because they avoid a lot of inventory costs and shelf space. It’s a win for the studios, because you avoid a lot of manufactuering costs and you get your product out there more quickly, and it’s a win for consumers because they can get it when they want, how they want and in the format they want it.”

I’ve been fascinated with the DVD kiosk ever since I first had an opportunity to inteview DVD Station and they showed me a DVD kiosk that already had burn on demand technology built into it. While I walked away impressed at the technology, I knew that it would still take years for the studios to embrace a solution this radical.

With the DVD rental stores having been slaughtered in the financial markets and with retailers clearly upset over Apple’s digital download plans of their own, it was only a matter of time before we saw the studios warm to the idea of bringing burn on demand to the retail store level.

By incorporating burning technology into kiosks and retail spaces, video stores and retailers could potentially stock 70,000 films and never have to worry about running out or about it taking up too much floor space. The idea is powerful, the economics could save the DVD industry for another decade and if Parsons’ statement that Redbox is already testing this functionality at Walmart is correct, it may be coming sooner then even I expected.

While it’s taken years for the studios to come up with a sound digital strategy and while I expect that it will likely take even more years to work out an HDTV digital strategy, nontheless I find it very exciting to see these developments. With 2007 marking the 7th anniversary of the AOL and Time Warner meger it is nice to know that consumers will finally be able to take advantage of the synergies that were promised when AOL and Time Warner first said that fateful I do.

Robots Attack And They Are Working For Less Then Minimum Wage

Dec 5

Posted by Davis in Kiosks, Robots, Technology | Comments off

Jack in the Box is reporting that they’ve started a new program on a very limited basis, where they refuse to pay their new employees overtime, give them any breaks, make them work 24/7, and they are paying them less then a dollar an hour to take orders from customers. No, they haven’t taken a page out of Walmart’s playbook, instead they’ve introduced fast food kiosks into three of their restaurants.

Basically, when customers show up they now interact with a kiosk instead of with a human. Someone in the back gets the order through a computer and then prepares the meal for the customer. Because the kiosk deals with taking the orders you can avoid spoilage because the kiosk is more accurate and because the kiosk handles the payments you don’t have to worry about the cash register ending up short at the end of the night. In fact even if you get robbed, you don’t even have to worry about them handing over the cash. On the surface, they may not look very tough, but I’ve got it on good authority that they have one armed cousins in Nevada who can be very stingy with paying out money.

I’ve got to say that I find this idea pretty appealling. When I get fast food, it’s not for the food, it’s for the fast. I want in and out with as little chit chat as possible. If kiosk ordering allowed me to order and pay directly, it might actually convince me to go into a Jack in the Box once in a while. Even better, if I could order via the net and pick it up I would be thrilled. I wouldn’t even mind if the cost savings went directly to the shareholders instead of the customers (although it would be nice to see them upgrade to something other then mystery meat.)

With the fast food industry now using centralized drive thrus, kiosk ordering and DVD vending, it’s only a matter of time before the robots take over. Throw in a couple of roombas into the equation and we could have the machines controlling the food supply for the majority of all Americans.

Via Kiosk Marketplace

Dinner & Movies Turns Into Smash Hit For McDonalds

Dec 1

Posted by Davis in DVDs, Kiosks, Movies, Technology | Comments off



Redbox Photo Originally Taken By Social Technologies

It’s hard to believe that the concept of Redbox started out 4 years ago, but what was initially a series of radical experiments by McDonald’s, has turned into an undeniable box office success for the company. McDonald’s may have first come up with the concept in 2002, but it wasn’t until 2003 that they tested their first unit. Initially, they had a very modest beta launch of only 6 DVD kiosks in their Las Vegas restaurants and another 11 in their Washington area stores.

Early on, there was a lot of doubt as to the real viability of the project. Analysts, insiders and consumers all expressed concern over whether or not they would ever see the machines gain acceptance. When McDonald’s pulled their experimental Tik Tok kiosks which sold items like milk, eggs, pantyhose and even diapers, many thought it would be curtains for their experiments with DVD as well.

Luckily for them, McDonald’s stuck with their Redbox venture and by the summer of 2004, the company started a 2 year test launch by expanding their DVD experiment to 100 machines in the Denver area. After gaining traction in Denver, Redbox quietely began opening up kiosks in four other markets and pretty soon a few grocery stores started signing contracts with Redbox as well. By the end of 2005, Redbox reported that they were renting 1.1 million DVDs a month at about 800 total locations. Realizing the potential for expansion beyond just McDonald locations in late 2005, McDonalds sold 47.3% of the company to Coinstar in exchange for $20 million in cash and another $20 million in 2006 if everything went according to plan.

Well if a recent announcement by McDonald’s is any indicator, I think it’s safe to say that things have gone much better then planned. Not only are there now 800 Redbox kiosks in McDonald’s alone, but there are another 1,000 locations in non-McDonald stores as well. In an press release issued on Thursday, McDonald’s announced that they now plan on expanding their relationship with Redbox and plan an aggressive rollout in the first half of 2007. This rollout will not only add more machines to McDonald’s locations, but will also introduce the DVD rental machines to new markets in the US.

When I contacted Redbox to get clarification on the scope of the McDonald’s rollout, Redbox Vice-President of Marketing, Greg Waring said that “to begin with, we anticipate more than doubling our presence in the first half of next year. Exact markets and locations will be announced in the coming weeks.”

With McDonalds set to add at least another 800 kiosks in the first half of 2007 and with Redbox currently in beta testing at both Walgreens and Walmart, the future for DVD kiosks may be looking very bright indeed. What may have started as a hairbrained idea to diversify McDonald’s revenue beyond fast food has turned into a full blown DVD revolution. With McDonald’s having now rented over 15 million DVDs in the last 12 months at just their own 800 DVD locations, the economics of this expansion appear very compelling.

From prior publically released information, we know that Redbox is paying Solectron Corp. $21,000 for their indoor units and $23,000 for their outdoor units. On top of this, we also know that they pay another $1,000 in software costs for the units. At an average of 1.25 million rentals a month this means that Redbox gets somewhere between 50 – 55 DVD rentals per day at their McDonald’s locations. Considering that an average rental period is 1.5 days, the rental traffic at a McDonald’s Redbox location should pay for the kiosk in just 9 – 10 months, not including content costs. After 10 months, the machine turns into a profit center that fuels growth all while still contributing to intangible benefits like being able to offer McDonald’s customers something other restaurants can’t, as well as serving as a mechanism to encourage repeat customers.

When I was a kid, I remember how excited I was when my parents took me to McDonalds to get a Happy Meal. It wasn’t the meal itself, but the toy inside that I always looked forward to. By incorporating dinner with a movie through their Redbox venture, McDonalds and Redbox have teamed up to create the equivalent of a Happy Meal for adults. The toy may not be a Malibu Barbie Doll or a Hot Matchbox car, but you can still rent Barbie in the 12 Dancing Princesses or Pixar’s smash hit Cars if you want to re-live your childhood all over again.

DVD Kiosk Industry Heats Up In Hot’Lanta

Nov 29

Posted by Davis in DVDs, Kiosks | 6 Comments

Atlanta's Newest ReleaseAtlanta’s Newest Release taken by the Spacey Gracey Review Hosted on Zooomr

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.

A Television In Every Home And A Redbox In Every Albertsons

Nov 21

Posted by Davis in Disclosure - I own stock in co. mentioned, DVDs, Kiosks, Netflix, TV | Comments off

Redbox continues to make in-roads into the emerging DVD kiosk market after Video Business reports that the company has signed an agreement to put a Redbox DVD rental kiosk into every Albertson’s store by the end of the first quarter of 2007. Albertson’s currently has a 100 Redbox machines installed in their Texas based stores and this expansion is an obvious sign that they’ve seen a positive impact from adding the kiosks to those stores.

Albertson’s has been my favorite grocery chain ever since I moved to Alameda two years ago and had an opportunity to experience their self checkout solution. While many customers still prefer having someone ring up their purchases and bag their groceries for them, I loved being able to ring up my own groceries and then quickly leave the store without having to make idle chit chat with store employees.

Because of their automated checkout system, I would specifically shop at Albertson stores when I lived in Alameda, even though there were more price sensitive grocery stores that I could have used. Albertson’s enhancement of their Redbox agreement, takes this automation philosophy one step further and makes it even more convienent for customers to get their errands done, by letting them rent movies quickly and effectively when they are doing their grocery shopping.

In addition to the expansion of Redbox’s Albertson agreement, the company also announced that they will be supporting four more independent grocery stores chains with their DVD solution. According to the Video Business article

“by January, all 130 Northeast U.S. Hannaford outlets will have Redbox kiosks. The 20 to 25 Strack N Van Til chain, located in Indiana and Illinois, will get machines by the end of this year. Already housing Redbox machines are Maryland’s single-store retailer Chevy Chase and the 18-store Indiana-based Martin’s.”

Between the expansion of Redbox’s current DVD contracts, the testing by Walmart in their Atlanta based stores and the recently announced trial relationship with Walgreens, Redbox is on pace to make 2006 a record year for the company.

Over the last 12 months they have seen the number of kiosks offered double and have their sights set on eventually reaching 20,000 locations nationwide. While at this stage, their kiosk solutions are only designed to fill spontaneous short head demand, I can’t help but wonder if at some point we’ll see the company launch their own DVD by mail program and offer a solution that not only fills instant gratification needs, but can also fill niche longtail demand for more obscure titles. Only time will tell if Redbox goes in this direction, but it would be a natural compliment to their business model and as the company develops a national footprint it could provide real competition to Netflix’s dominance of the DVD by mail market.

RedBox Still RedHot

Nov 3

Posted by Davis in Disclosure - I own stock in co. mentioned, DVDs, Kiosks, Movies, Netflix, Uncategorized | 3 Comments

On a day where Blockbuster Video had to admit that they were forced to close 343 net stores over the last quarter, Coinstar reported their earnings and gave the investment community a very different outlook on the current state of the DVD kiosk industry.

In short the DVD kiosk industry is strong. Redbox has done exceptionally well this year and over the long term, Coinstar expressed confidence that Redbox can get to over 10,000 locations in the next 3 – 5 years.

Over the last quarter, Redbox has added approximately 200 new kiosks to their program. For kiosks that have been open for over a year, they’ve seen an astonishing 147% improvement in rentals from just a year ago. This is up from the already amazing 105% same store growth that was announced last quarter.

If you look at Redbox’s progress, over the first 9 months of 2006, Coinstar reports that they rented 13.8 million DVDs with the average rental period being 1.5 nights for most consumers. Due to stronger then expected demand for DVD kiosk rentals, Redbox now expects to show a $1 – $1.5 million loss for all of 2006, compared to previous estimates that had placed that number at closer to a loss of $5 million.

With over 900 DVD kiosks having been rolled out over the last 9 months, Redbox now has approximately 1,600 kiosks nationwide. Of these 1,600 machines, approximately 1,000 are located in McDonald’s restaurants and the other 600 are currently, either being tested or in the process of being rolled out by 30 other merchants.

Of these merchants two particularly important relationships were forged over the last quarter. The first was with Walgreens who is currently testing 38 Redbox machines in Houston and Chicago. The second and more significant partner is Walmart who has been testing Redbox vending machines in their Atlanta based stores. While Coinstar stopped short of giving the exact number of Walmart stores that were participating in the tests, by doing a little online sleuthing, I was able to find over 20 Georgia Walmart locations that were listed on the Redbox website.

If these tests with Walmart go well, it would be a huge development for Redbox. With 2006 largely turning out to be a testing phase for most retailers, 2007 is increasingly begining to look like it will be the year that the DVD kiosk begins to go mainstream. Retailers are now showing clear demand for the advantages of bringing DVD rental into their stores and after Walmart tried and failed with their own DVD by mail program, it will be interesting to see if they embrace the kiosk as an alternative way to provide DVD rentals in their stores. While the Walmart program is still very much in a test phase, Coinstar said that they expected that they could see a decision on whether or not an expansion will happen between November 2006 – February 2007.

The DVD kiosk is in an excellent position to take advantage of the misfortunes of the video store. While the selection at a kiosk isn’t the same as a full retail store and certainly isn’t anywhere close to the same as the 65,000 DVDs that Netflix offers, the technology is here to do burn on demand DVDs and I believe that this will be the future of the DVD rental. In the near term, the DVD kiosk will offer short head content that is popular with many consumers and DVD by mail will offer the longtail content that I personally prefer, but as DVD burning gets closer to becoming a reality and if Redbox or any of the other kiosk providers ever combines DVD kiosks with DVD by mail, we will see a very different business model present itself.

DVDXpress has already announced that they are experimenting with a subscription rental business model and with Coinstar owning an option to purchase their company over the next two years, I believe that we could also see Redbox adopt a similar strategy. If the subscription model proves lucrative, it could not only put pressure on Blockbuster and Movie Gallery to innovate, but Netflix as well. With more and more rental options becoming a reality, the end result will be that the consumer will win most of all. While it’s exciting to see Redbox demonstrate such phenomenal growth, it’s even more exciting to realize that the company is still very young. As they move from 1,600 kiosks to 5,000 and then to eventually 10,000, it will be fascinating to watch the effect it has on the DVD industry.