UPDATE: Redbox plans hundreds more locations at McDonald's, grocers
By Susanne Ault 3/26/2007

MARCH 26 | Over the next five years, DVD kiosks could generate as much as $1 billion in revenue, representing 10% of the traditional rental market, according to a survey commissioned by kiosk firm TNR Entertainment Corp.

Rival Redbox, owned by Coinstar and McDonald’s, meanwhile, has even more aggressive projections, forecasting kiosk DVD rentals will expand to $3 billion in 2009.

In 2007, sources estimate, DVD rental kiosks should generate $200 million to $250 million, or about 3% of the roughly $7.5 billion DVD rental market.

Now at more than 2,700 outlets, Redbox is opening up hundreds of new locations each week inside grocers and McDonald’s restaurants. Starting this week, the company has formally launched machines in three new McDonald’s markets: Jacksonville, Fla.; San Antonio; and southern Colorado.

“In each of these new markets, we’ve instantly become the No. 1 renter of DVDs as measured by number of locations,” said Greg Waring, Redbox VP of marketing. “We’ve opened up 70 outlets in Jacksonville, 81 in San Antonio and 26 locations in southern Colorado. … I think we generally agree with [TNR] findings, but we find the estimates conservative.”

TNR’s survey indicates that 60% of current DVD renters are interested in renting titles from a DVD rental machine, but only 5% of respondents had actually rented a DVD in this fashion. One-third of those surveyed said they were aware of the kiosk concept, and about one-third of DVD renters are frequent shoppers at grocery outlets, where many kiosk companies, including TNR and Redbox, have slotted their machines.

TNR has tried to differentiate itself from Redbox by primarily locating machines inside grocery stores, spanning Krogers, A&P and Ralph’s, among others.

“There are several compelling factors supporting the significant migration from conventional rental venues,” said Richard Cohen, TNR Entertainment CEO. “Combined with installation forecasts of 25,000 or more retail sites over the next three years, these factors reflect a market potential for the alternative kiosk approaching $1 billion.”

TNR will use these findings to expand its rentals at existing locations.

“This survey allows us to more precisely define the consumer base in critical demographic and attitudinal ways so we can better position our offerings and address needs,” said Tony Sciolla, TNR chief marketing officer. “With our expanded knowledge of what consumers want, we can successfully achieve our ultimate goal—increasing same-store sales from kiosks for our retail partners and the company as well.”