Blockbuster Kiosks: Interview With NCR Corp.

Blockbuster announced Tuesday, September 15th in an SEC filing that it would be closing around 960 ( 22%) of its stores by the end of 2010.  That is double Blockbuster’s previous projection of 425 store closings.  Many of these locations will be replaced by Blockbuster Express movie rental kiosks manufactured and operated by NCR Corp.  As I stated in an earlier post, Blockbuster’s entrance in to the kiosk market seems to completely contradict their business model.  With Redbox projecting 22,000 units by year-end, it appears Blockbuster is operating under the business strategy of “if you can’t beat ‘em, join ‘em”.  Blockbuster, clearly a late entrant to the market, plans to open 10,000 kiosks by the middle of next year. I recently spoke to NCR Corp.’s Manager of PR Jeff Dudash to hear their side of the story.

Sceneclips Interviews NCR on Blockbuster Kiosks

 
About 15 minutes

Although I still have a hard time understanding how kiosks compliment Blockbuster’s retail stores, current opportunities in the market should not be blinded by the anticipation of future opportunities.  While streaming video on demand is certainly the distribution means of the future, the kiosk market is by far the fastest growing movie rental distribution channel.  Last year, kiosks grew from 2% of the movie rental market to 19% this year, and according to NPD Group the kiosk market will grow to 30% in 2010.  That being said, Blockbuster’s entrance is no doubt an act of desperation to maintain its dwindling market share.  The problem with the initiative and with Blockbuster as a whole is that they are:

• Late to the market – Redbox has already established itself as the dominant player and has nearly 10 times the number of kiosks that Blockbuster has.
  
• In a poor financial situation – They nearly went bankrupt before issuing $675 million in senior bonds.
• Still lacking a streaming media strategy – Netflix takes the crown here, just like they did in the DVD by mail market.

Please note: I am not a Netflix, Blockbuster nor NCR shareholder. My thoughts and analysis bear no interest of personal gain. I express them simply because I care about film distribution.