Old and new roads converge

MAY 19 | At first glance, it may look like DVD rental kiosks and digital downloads of movies are worlds apart in their ability to move the home entertainment industry toward the future.

Kiosks are essentially an old technology, an old distribution method, dispensing a 9-year-old format in plastic packages. While digital downloads—either direct to consumers over the Web or to retailers for burn-on-demand inventory—are new, sexy and well, electronic. No inventory to stock, no boxes to store, they’re the entertainment equivalent of the paperless office.

Look more broadly, however, and it appears that kiosks and downloads are not at opposite ends of the home entertainment spectrum but together, on the leading edge, in the push toward making more movies (and TV episodes) more readily available in even more places.

The problem with standard DVD is not that consumers find its quality, selection or availability lacking. It’s that its growth has topped out. Store shelves are full, consumers’ shelves are full and U.S. demand has flattened at $24 billion, more or less. To get the business growing again, studios and retailers must get people to buy more, regardless of format. That’s the reason for the studio and retailer pushes behind next-generation high-def discs, digital downloads and even old-fashioned kiosks.

One way to get people to buy more is to put movies in front of them in places they visit very often, like the supermarket, Starbucks and McDonald’s.

Through VSDA, the studios met with grocers earlier this month to discuss what might enable supermarkets to stock and sell more movies, including the implementation of better theft prevention schemes and the possible use of so-called “electronic sell-through,” or digital downloads to the store, as a way to expand selection without increasing inventory in stock.

Plans for e-sell-through are well underway at a variety of retailers, from Wal-Mart to Trans World.

Also recently, Coinstar, which owns the Redbox kiosk service with McDonald’s, pitched grocers on the incremental profit they can make with DVD rental kiosks in the front of stores.

Old kiosks and new downloads are two means to the same end of increasing home entertainment sales in a retail channel consumers probably visit more than any other.

With this push to make movies as ubiquitous as coffee, it’s natural that Starbucks is currently one of the retail partners most desired by studios. The on-every-corner retailer is moving slowly but, at least according to content owners, has definite plans to increase the entertainment options available in its stores—both in packaged form and as digital content that could be downloaded while your cappuccino cools.