April 22, 2009
Blockbuster Branches Out With Kiosks
NCR Corporation’s acquisition
of TNR Holdings, the second largest operator of video rental kiosks in
the U.S. behind Redbox, may enable Blockbuster
Entertainment to expand its kiosk program as it seeks to move towards it
goal of operating 10,000 vending units by the end of next year. NCR and
Blockbuster are partners in the retailer’s Blockbuster Express kiosk program.
"Blockbuster
would like to congratulate NCR on its acquisition of TNR Entertainment,"
said Jim Keyes, chairman and CEO of Blockbuster, in a press release. "We
remain excited about DVD vending, and through our alliance with NCR, we are
poised to participate in the category’s growth. We believe NCR’s acquisition
sets the stage for aggressive growth and will further our goal of deploying
thousands of Blockbuster Express branded kiosks by next year, providing another
platform to give consumers added control, flexibility and convenience that
goes beyond our traditional store locations."
TNR currently operates
more than 2,200 kiosks at supermarkets and other locations under the "MovieCube" and "The
New Release" brands. As a point of comparison, Redbox currently
operates 14,000 units. A decision has not been made yet as to whether TNR’s current
boxes will be rebranded as Blockbuster Express units.
Last month, according
to a report by The Dallas Morning News, Mr. Keyes told analysts he was "glad that our friends at Redbox proved it out, because it is a good consumer proposition." He
believes the business will move from dispensing DVDs stored inside a vendor
to a digital downloading model.
The deal for TNR comes
on the heels of a recent disclosure by Blockbuster that it was having trouble
meeting the requirements of its $250 million credit facility raising "substantial
doubt" about its viability.
Discussion Questions:
What are your thoughts on NCR’s acquisition of TNR and its implications
for the expansion of Blockbuster Express? Why the further investment
now in kiosks if the speculation is that the business will evolve into
digital downloads?
BrainTrust
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Discussion Questions
Poll
I’m not sure if I see kiosks as the next big thing in video rentals/sales. Blockbuster stumbled because the notion of physical access became less important in the video rental business. Does creating another physical solution change all that? I don’t think so.
The move to digital downloads is not going to happen overnight. It will take a few years. During that time, there is plenty of room for more Blockbuster kiosks. This is a good move on the part of NCR and Blockbuster.
Blockbuster is missing the trend and catching it on the tail as it streaks through the universe. The kiosk idea should have been implemented years ago, as now it is starting its decline. Instead of sitting back waiting, they should be reinventing themselves. You can’t continue to do what you’ve always done and expect different results. Where is the strategy and vision?
If the business model is moving towards a digital download format, why invest in vending machines? Blockbuster should focus on the current trends and not outdated technology. These kiosks are better run by having a third party manage the system and re-brand the kiosk to the store housing it (ie: Publix and Kroger would have their own branded kiosks renting DVDs but it would be wholly administered by another company ie: Redbox or NCR).
The Blockbuster brand doesn’t have the luster that it once had. Why invest in a format that is already waning? Goes back to BB’s resistance to the DVD format when it came out. They always seem to be a little behind which is disturbing considering the industry they are in.
Many convenience store chains, most recently 7-Eleven, are continuing to invest in DVD kiosks as a way to reach new consumers and drive visits to the lot. As the former CEO of 7-Eleven, Jim Keyes understands this and will likely begin to target c-stores along with supermarkets and other retail venues. The key for this concept to be successful in c-stores is to continue offering customers value, variety and flexibility.
Who pays to watch movies? Free downloads on the internet or your can borrow for free at the library? The movie rental business is obsolete. Even YouTube has free movies.
Personally, I’m interested to see if NCR’s involvement will finally lead to some integration between the “4th wall” of the supermarket and the rest of their operations. Coinstar, RedBox, and others have done quite well building standalone, drop-in appliances for the front of store. What they lack is a unified, seamless integration into the store operations. Perhaps this move is laying the groundwork for e-coupons for microwave popcorn with every 5th in-store rental.
Here’s yet another business opportunity that Blockbuster was caught napping on. They are the second horse in the race, and will lose.
Continuing to emphasize physical presence with kiosks is less expensive than real estate but is physical presence really the road to success? I doubt it.
I’m intrigued by the element of this discussion that seems to completely dismiss the value of a physical experience. Surely our history makes it abundantly clear that some consumers will continue to value physical interactions for an extended period after digital/virtual options become available–if not forever.
Examples are easy enough to find. Why do we still have “snail mail”? Why do we still have catalogs? Why do we still have paper currency and coins? Why do we still have music CDs? Why do we still have vinyl records?!?! Why do we still have books?
And the numbers show that this is not just the long tail of adopters who have not yet completed the road to dinosaurdom. In fact it is the heaviest of all users in most categories who continues to consume all forms of the category, gleefully enjoying the DVD they grabbed from a redbox while waiting on the download from iTunes as they put their Netflix returns in the post–which they will drop off on the way to the MoviePlex!
All of these formats have a much longer half-life than we are giving them credit for.
Redbox did prove the way for others to follow, but is following always the best method to reach your goals? I think senior management at Blockbuster should take some time and read Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne ASAP.
Blockbuster clearly has a flaw in their business model, but I am not convinced that mimicking Redbox is the answer or is it better to use the name and reputation to explore the next leap in technology. Blockbuster not only has to deal with Redbox, but Netflix and disposable one-time-use videos sold in stores..
Two ideas:
1) Find a way to tie together purchases in the store with video rentals. Catalina coupon?
2) Build an online rental business with online shopping (Pea Pod). How great would it be to order your groceries and a video online and have them delivered?
Good luck Blockbuster. I hope you decide to be a leader and not a follower.
Kiosks are a stopping point between the store and the internet. They continue grow in their ability to inform, interact and provide services to the consumer. The new competition appears to be the cell phone for information and interaction. For Blockbuster this is just a holding action for an outdated business model. Even Netflix will likely have trouble with the marriage of the personal computer and television. Video on demand is clearly the future and winner.
Innovate, adapt, or die. Jim Keys understands small-box retailing better than almost anyone else in the country. The Kiosk is another small box and this is going to be a great move for Blockbuster. They have got to change the model to succeed and this is just the first step.
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I’m not sure if I see kiosks as the next big thing in video rentals/sales. Blockbuster stumbled because the notion of physical access became less important in the video rental business. Does creating another physical solution change all that? I don’t think so.
The move to digital downloads is not going to happen overnight. It will take a few years. During that time, there is plenty of room for more Blockbuster kiosks. This is a good move on the part of NCR and Blockbuster.
Blockbuster is missing the trend and catching it on the tail as it streaks through the universe. The kiosk idea should have been implemented years ago, as now it is starting its decline. Instead of sitting back waiting, they should be reinventing themselves. You can’t continue to do what you’ve always done and expect different results. Where is the strategy and vision?
If the business model is moving towards a digital download format, why invest in vending machines? Blockbuster should focus on the current trends and not outdated technology. These kiosks are better run by having a third party manage the system and re-brand the kiosk to the store housing it (ie: Publix and Kroger would have their own branded kiosks renting DVDs but it would be wholly administered by another company ie: Redbox or NCR).
The Blockbuster brand doesn’t have the luster that it once had. Why invest in a format that is already waning? Goes back to BB’s resistance to the DVD format when it came out. They always seem to be a little behind which is disturbing considering the industry they are in.
Many convenience store chains, most recently 7-Eleven, are continuing to invest in DVD kiosks as a way to reach new consumers and drive visits to the lot. As the former CEO of 7-Eleven, Jim Keyes understands this and will likely begin to target c-stores along with supermarkets and other retail venues. The key for this concept to be successful in c-stores is to continue offering customers value, variety and flexibility.
Who pays to watch movies? Free downloads on the internet or your can borrow for free at the library? The movie rental business is obsolete. Even YouTube has free movies.
Personally, I’m interested to see if NCR’s involvement will finally lead to some integration between the “4th wall” of the supermarket and the rest of their operations. Coinstar, RedBox, and others have done quite well building standalone, drop-in appliances for the front of store. What they lack is a unified, seamless integration into the store operations. Perhaps this move is laying the groundwork for e-coupons for microwave popcorn with every 5th in-store rental.
Here’s yet another business opportunity that Blockbuster was caught napping on. They are the second horse in the race, and will lose.
Continuing to emphasize physical presence with kiosks is less expensive than real estate but is physical presence really the road to success? I doubt it.
I’m intrigued by the element of this discussion that seems to completely dismiss the value of a physical experience. Surely our history makes it abundantly clear that some consumers will continue to value physical interactions for an extended period after digital/virtual options become available–if not forever.
Examples are easy enough to find. Why do we still have “snail mail”? Why do we still have catalogs? Why do we still have paper currency and coins? Why do we still have music CDs? Why do we still have vinyl records?!?! Why do we still have books?
And the numbers show that this is not just the long tail of adopters who have not yet completed the road to dinosaurdom. In fact it is the heaviest of all users in most categories who continues to consume all forms of the category, gleefully enjoying the DVD they grabbed from a redbox while waiting on the download from iTunes as they put their Netflix returns in the post–which they will drop off on the way to the MoviePlex!
All of these formats have a much longer half-life than we are giving them credit for.
Redbox did prove the way for others to follow, but is following always the best method to reach your goals? I think senior management at Blockbuster should take some time and read Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne ASAP.
Blockbuster clearly has a flaw in their business model, but I am not convinced that mimicking Redbox is the answer or is it better to use the name and reputation to explore the next leap in technology. Blockbuster not only has to deal with Redbox, but Netflix and disposable one-time-use videos sold in stores..
Two ideas:
1) Find a way to tie together purchases in the store with video rentals. Catalina coupon?
2) Build an online rental business with online shopping (Pea Pod). How great would it be to order your groceries and a video online and have them delivered?
Good luck Blockbuster. I hope you decide to be a leader and not a follower.
Kiosks are a stopping point between the store and the internet. They continue grow in their ability to inform, interact and provide services to the consumer. The new competition appears to be the cell phone for information and interaction. For Blockbuster this is just a holding action for an outdated business model. Even Netflix will likely have trouble with the marriage of the personal computer and television. Video on demand is clearly the future and winner.
Innovate, adapt, or die. Jim Keys understands small-box retailing better than almost anyone else in the country. The Kiosk is another small box and this is going to be a great move for Blockbuster. They have got to change the model to succeed and this is just the first step.