Blockbuster-NCR Deal Heats Up Competition in Unattended Payments

The growing market in DVD rentals from vending machines became more competitive this week when video-rental icon Blockbuster Inc. announced a deal with NCR Corp. in which the maker of ATMs, other banking hardware, and kiosks this quarter will begin deploying the first of what it expects could be 10,000 DVD-dispensing kiosks within 18 months for Blockbuster. Blockbuster's commitment to vending machines gives the 7,700-store global chain a foothold in the smallest but fastest-growing segment of what it calls the “domestic media entertainment industry.” Citing figures from Adams Media Research, Dallas-based Blockbuster's annual report for the 2007 fiscal year ended Jan. 6 projects total industry in-store rental revenues of $5.83 billion for 2008, down from $6.22 billion in 2007 and $7.03 billion in 2006. In contrast, Adams estimated vending revenues would hit $388 million this year, up from $198 million in 2007 and only $79 million in 2006. Revenues from DVD rentals via mail could increase to $2.02 billion in 2008 from $1.80 billion in 2007 and $1.29 billion in 2006, according to Adams. Bellevue, Wash.-based kiosk deployer Coinstar Inc., best known for its coin-counting machines in grocery stores, in January increased its stake in the DVD-rental market by taking a majority interest in Redbox Automated Retail LLC. Many of Redbox's 7,000-plus DVD-rental kiosks are deployed in such high-traffic areas as Wal-Mart Stores Inc. and McDonald's Corp. locations in addition to outside supermarkets. Cash dominates in-store DVD and video rentals, but credit or signature-based debit cards will be the only way to pay with the new Blockbuster DVD kiosks. The machines will not be equipped to accept PIN-based debit cards, a Blockbuster spokesperson tells Digital Transactions News. Asked about the possibility of accepting contactless cards, a spokesperson for Dayton, Ohio-based NCR says by e-mail, “NCR can offer contactless payment options in the future, depending on our customers' requirements.” The first phase of the NCR pact involves deployment of 50 Blockbuster-branded kiosks by year's end. Future options include DVD sales and digital downloads. “Blockbuster plans to test digital movie-downloading kiosks in select Blockbuster locations,” the NCR spokesperson says. “The first of those units is expected to be installed in two Dallas stores this summer.” The Blockbuster spokesperson says the retailer is licensing, rather than buying, the machines, which can hold 1,000 to 4,000 discs. Instead, either NCR or an independent entity will own them. “A final determination has not been made,” the NCR spokesperson says regarding ownership. “NCR is in discussions with an independent service operator [ISO]. More details will be made available when Blockbuster announces the locations and rollout plan for these kiosks.” The companies did not disclose the processor of transactions originating from the machines. Kiosk locations could be apart from Blockbuster's approximately 5,000 U.S. stores. “We expect these kiosks will be in high-traffic retailer areas,” says the Blockbuster spokesperson. Blockbuster started a six-month kiosk test last October with an undisclosed provider. “The trial was designed to give us insights into DVD vending,” the Blockbuster spokesperson says without giving details. He says Blockbuster chose NCR as its kiosk provider because its technology and services “could be beneficial to both Blockbuster and our customers.”