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NCR Corp. (NCR) has bagged a growing convenience-store chain as the next retailer to roll out its Blockbuster Express-branded DVD-rental kiosks.
Sheetz, a closely held, Altoona, Pa.-based chain that has marched southward as it expands, is adding the movie-rental kiosks at nearly all 365 locations, NCR is expected to announce Monday. The rollout is one of the biggest so far in NCR's efforts to have some 10,000 kiosks operating by year end through its partnership with Blockbuster Inc. (BBI). The current number is about 4,000.
That's still a small number compared with the more than 20,000 movie-rental kiosks operated by Coinstar Inc.'s (CSTR) Redbox unit across the U.S.
But it's an important business for NCR, which is known for its ATM and point-of-sale machines at checkouts all over the world.
"Entertainment for us is one of our emerging businesses--one that we're very focused on and one that we're very invested in," said Alex Camara, vice president and general management of NCR Entertainment.
The company spent $60 million last year to grow the entertainment business, including buying two other leading kiosk operators. And it has said it wants to be the global leader in self-service entertainment. That could include not only movies but also music and books, and it could mean NCR expands into other forms of delivering entertainment, including digital and by-mail services.
NCR wouldn't comment on whether it might be interested in buying any of Blockbuster's businesses, which already include a by-mail service and an in-home digital download service.
But it's clear the current kiosk partnership is critical for Blockbuster, which wants to move more quickly into alternative methods of movie-rentals besides its roughly 4,000 U.S. stores. Those stores have lost business to Redbox and to Netflix Inc.'s (NFLX) subscription-based movie-rental service.
Blockbuster licenses its brand to NCR, sharing in the revenue from the free-standing kiosks, which dispense DVD rentals for as little as $1 a day. The movie-rental giant also supplies NCR with some movies and has provided expertise related to consumer demographics, Camara said.
At the same time, NCR is running the kiosk business, including paying for and servicing the machines, which reduces Blockbuster's risk and helps it conserve capital needed to service debt and to run its stores. Blockbuster Chairman and Chief Executive Jim Keyes said last month the company is "delighted" with its partnership with NCR.
For NCR, the arrangement so far has also worked well, Camara said, though he declined to comment on Blockbuster's financial condition. "We believe they have a major role to play in the DVD market, both in the physical and digital and by mail," he said. "We see them as a good partner."
The Blockbuster brand "has been very powerful on the kiosk," he said. "It's been very strong in terms of getting the customers to use us quickly. That was another piece for Sheetz that was important. They (customers) know the brand; they like the brand."
An NCR survey asking consumers which of six kiosks they would most likely choose to rent a DVD movie found that 47% of people named Blockbuster as their first choice--more than Redbox, Hollywood Video and the other three brands combined. Nearly 80% of those surveyed included Blockbuster among their top three choices.
Camara said NCR's reputation for security and reliability, as well as the digital signs playing advertisements and movie trailers on its Blockbuster Express kiosks, have given it an edge, too.
NCR has also been pleased with test results of kiosks that can provide digital movie downloads onto secure-digital, or SD, memory cards for play on devices such as laptops. Those tests have been with Blockbuster and Hollywood Video, whose Movie Gallery Inc. (MVGRQ) parent last month filed for Chapter 11 bankruptcy protection.
NCR expects to roll out several hundred such kiosks and doesn't yet know how many will be with the Blockbuster brand. But NCR is also shopping the technology to other retailers who may want to offer their own digital-download services in stores.
-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145; email@example.com