Dollar-rental kiosks continue growing DVD market share; Par, Redbox sign deal (THR, VB, LAT)

By Nancy Tartaglione

Redbox and other DVD-kiosk chains have grown to 19% of the DVD rental market but are projected to make up 30% of it by the end of 2010, according to an industry study by NPD Group that was released Tuesday.

The current market share of kiosk companies, which collectively form the controversial dollar-rentals portion of the DVD marketplace, compares with a 36% share for Netflix and other subscription services and a 45% piece of the rental market for Blockbuster and other traditional video stores.

This is a big shift given that just a few years ago, DVD kiosks represented less than 2% of the rental market. Earlier this month, Redbox owner Coinstar said it more than doubled its second-quarter revenue from a year earlier after almost doubling its number of kiosks to almost 18,000 and boosting sales per machine by 33%.

Redbox has divided Hollywood with bad blood running between it and Universal, Fox and Warner Bros. while on the flipside Sony, Lionsgate, and now Paramount, have entered into deals.

Disney also provides titles to the discounter but is the only major studio yet to take a stance on the hot topic of what to do about dollar rentals, The Hollywood Reporter notes.

The Paramount deal gives Redbox access to Paramount Pictures releases on a trial basis through the end of the year. After the four-month trial period Paramount will have the option to extend the program through 2014. As with its deals with Sony and Lionsgate, Redbox has pledged to stop reselling older DVDs on the used-disc market.

Under a revenue-sharing agreement, Redbox estimates it would pay Paramount roughly $575 million if the deal runs through the extended period, Reuters reports, citing an SEC filing.

The deal is potentially worth 25% more in revenue than Redbox's biggest contract to date - a $460 million, five-year pact that gives Sony a 19.9% share in Redbox kiosks, Video Business notes.

But, it's not just the studios who will feel the Redbox heat going forward. The study found that "in the coming months, both subscription services and traditional video retailers will experience even more competition from kiosks, which are becoming more ubiquitous in grocery stores, mass merchandisers and quick-serve restaurants."

Further, Redbox President Mitch Lowe recently said that the company will be experimenting with pricing structures, The Los Angeles Times points out.

According to one industry source, it will start that process by the end of the year, and one point of experimentation will be charging a higher price for the first night's rental.

Related Links

Dollar nights gain traction in DVD trade (THR)
Redbox, rivals to control 30% of rentals (VB)
Paramount, Redbox in trial DVD rental program (REU)
Paramount, Redbox ink DVD deal (THR)
Paramount to study Redbox effect before triggering $575 million deal (LAT)