Blockbuster plans 10,000 DVD rental kiosks

Strategy to challenge kiosk leader Redbox

Blockbuster won't cede the DVD kiosk industry to upstart Redbox just yet.

The video-rental giant said Monday that it will test 50 automated kiosks built by NCR, a company known for its ubiquitous automated teller machines.

The test begins this quarter with the intention that it will be successful -- competitors have proved as much -- encouraging Blockbuster to roll out 10,000 kiosks in the next 18 months.

The company won't discuss the business model or say where the 50 kiosks will be tested.

But the leader in the industry, a company called Redbox that is backed by McDonald's and Coinstar, is a bit more forthcoming.

Redbox operates 6,000 kiosks, each containing more than 500 DVDs representing as many as 150 new-release titles. Redbox rents the DVDs for $1 a night, and rentals can be returned at any kiosk. The company splits the revenue with the venues that house the kiosks.

Analysts expect that the DVD kiosk industry will grow $197 million last year to $760 million in 2010.

Blockbuster said Monday that while its machines will stick to renting DVDs for now, the technology allows for them to burn DVDs in the future for purchase.

Separately, that particular business is expected to get a boost Tuesday when Nero and Polar Frog announce a partnership introducing open standard for DVD-burning technology for use in kiosks, including their solution for copy protection.

The partners said they will introduce kiosks to 10 major universities in the U.S. by year's end. Users will be able to choose from a list of 13,000 titles and burn them to a disc on the spot.

For now, the titles come mostly from independent production companies, but Nero and Polar Frog are hoping to encourage the participation of major studios in as early as the fourth quarter.