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    DVD Rental Kiosks Popping Up at Retailers

    Both Redbox and Blockbuster plan to add thousands more kiosks by the end of this year.

    CHARLESTON, S.C. -- Redbox vending machines, from the $1 do-it-yourself DVD rental company, seem to be popping up just about everywhere from supermarkets and drugstores to restaurants and convenience stores, according to a report by The Post and Courier.

    For $1 each, customers can swipe their ATM cards and take home the latest new movie releases. Redbox operates more than 15,400 kiosks throughout the United States, and the company plans to introduce roughly 5,000 more by the end of the year. Each machine holds as many as 700 DVDs and 200 movie titles, the report stated.

    "We are in locations where consumers are already shopping," Redbox spokesman Chris Goodrich told the newspaper. "We are saving customers that extra stop."

    An added bonus is Redbox DVDs don't have to be returned at the same place they were rented; they can be returned to any Redbox kiosk. Because customers rent a DVD from the machine using their ATM cards, Redbox can charge an additional day's rental if the DVD is not returned within 24 hours. If a DVD hasn't been returned in 25 days, the charges stop and the customer owns the DVD.

    A typical kiosk can earn quite a haul: about $50,000 annually in revenue per machine in operation after three years, according to The Post and Courier report.

    "We have grown at a phenomenal pace over the last six years, and that growth is continuing even in the midst of a recession," said Gregg Kaplan, who led Oakbrook Terrace, Ill.-based Redbox Automated Retail from its inception until April, when he became chief operating officer of its parent company, Bellevue, Wash.-based Coinstar Inc. "We're not seeing anything that's slowing it down."

    Coinstar, which owns Redbox as well as the smaller DVDXpress, found at such places as Bi-Lo, DVD revenues in its first quarter totaled $154.7 million, a 156-percent increase over the prior year's same quarter, Goodrich said in the newspaper report.

    "The success isn't recession-driven, but it has raised the tone of success," Goodrich said. "When the recession ends, Redbox will still be very popular."

    To counter Redbox's surge into the movie rental business, Dallas-based Blockbuster Inc. plans to roll out about 3,000 DVD vending kiosks by the end of this year. Blockbuster, which normally charges approximately $4 per movie rental in its 4,000 U.S. stores, has 50 kiosks in its home base and Oklahoma City, with plans to add more elsewhere by year's end. Where these new DVD Blockbuster Express units will be still is up in the air.

    "We hope to significantly increase our presence," Blockbuster spokesman Randy Hargrove said, adding the plan is put them at convenience stores, supermarkets and drugstores. However, he noted that they won't be sitting beside Redbox machines.

    "You will not see competing vending machines at the same location," he said. "Given the projected growth, there are opportunities to put them in different locations."

    The pricing may be different, too. "It could vary with market demand, but it will be competitive with what's in the marketplace," Hargrove said in the report.

    Hargrove views Blockbuster’s DVD kiosks as having more unit capacity than its competitors' machines and the likelihood of additional features such as DVD and video game sales as another outlet to the company's mortar-and-brick buildings. Like Redbox, Blockbuster Express DVDs can be returned to any Blockbuster Express kiosk.

    Video industry analyst Tom Adams estimated the kiosk rental market, which totaled $519 million last year, will reach $1.4 billion in five years, the report stated.

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