Blockbuster gains ground in rental kiosk turf war

Yet another home movie product has turned into a color war between red and blue.

Republicans versus Democrats, Bloods versus Crips, HD DVD versus Blu-ray -- whenever two groups are vying for some territory claim, they mark it with a red or a blue flag. Coinstar's Redbox DVD rental kiosks have marked off some 15,000 locations across the United States with a big red...well, box.

By mid-2010, there are expected to be 10,000 Blockbuster Express kiosks staking out locations with a big blue box.

Blockbuster was king of the megastore movie rental business in the United States. But as the rental model began to shift more toward by-mail rental plans, streaming video on demand, and small but ubiquitous DVD rental kiosks, it lost significant ground to competitors that had no physical stores at all: Netflix and Redbox.

To compete with Netflix (which incidentally also uses a red motif), Blockbuster offers its By Mail plans and OnDemand instant streaming; to compete with Coinstar's Redbox, Blockbuster has licensed its brand to rental kiosks company NCR Corp., which it first showed off Blockbuster rental machines more than one year ago and began deploying earlier in the summer. Like Redbox, DVD rentals from Blockbuster Express kiosks cost only $1 per night.

If you haven't seen one of these Blockbuster Express kiosks yet, it's because the only state which has a major deployment is Florida; but in the last two weeks, NCR has announced partnerships with national grocery store chains that expand their reach into Massachusetts, Connecticut, Alabama, Georgia, and South Carolina. By the end of 2009, the company says there will be 2,500 kiosks up and running, and NCR will have invested more than $60 billion on the business.

Additionally, through NCR's acquisition of The New Release (TNR) in April, MovieCube rental kiosks will be converted into Blockbuster Express machines, adding coverage in even more local grocery stores across the country.

But one of the biggest reasons Redbox has attained dominance in the market is because it crossed the imaginary color barrier and aligned with major "blue team" US retailer Wal-Mart, which has more than 3,500 locations nationwide. Blockbuster could make a similar move and get kiosks installed in national "red team" retailer Target, which has more than 1300 locations in 47 US states.