Dollar nights gain traction in DVD trade

Kiosks to make up 30% of rental market by the end of 2010

Redbox and other DVD-kiosk chains have grown to 19% of the DVD rental market but are projected to comprise an impressive 30% by the end of 2010, according to an industry study released Tuesday.

NPD Group said 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.

Just a few years ago, DVD kiosks represented less than 2% of the rental market. Redbox, co-founded by McDonald's but now 100%-owned by Coinstar, changed all that after it began aggressively rolling out its network of rental kiosks in retail locations nationwide in 2005.

"Consumers are obviously responding positively to the perceived value of $1-per-day rentals," NPD analyst Russ Crupnick said. "And they appreciate the convenience offered by video rental kiosks."

NPD said its market projection is based on weekly U.S. consumers ages 13 and older.

Hollywood studios have been divided in their strategies about dealing with the kiosk-rentals trend. Some including Universal, Fox and Warner Bros. have sought to stem the supply of DVDs to dollar-rental companies, while Sony, Lionsgate and Paramount recently struck deals with Redbox to secure a pledge eliminating the company's practice of reselling older titles on the used-disc market.

NPD said other kinds of disc-rental companies increasingly will be squeezed by the kiosk trend.

"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," the researcher said.

Still, it noted that kiosks tend to stock a more limited supply of DVDs, generally featuring just the newest titles.

"A primary consumer appeal for subscriptions and store rentals is their depth of title selection -- a key benefit that might help mitigate the increased competition from kiosks, which offer a more limited list of video titles," NPD said.