This is an interesting brand extension for McDonald's, although I haven't quite made the connection yet. I'll have to do some more noodling on this one.
At a Stop & Shop supermarket here, one of 550 test sites around the country, customers can get DVDs of the most popular movies -- from Clint Eastwood's hit ''Million Dollar Baby" to ''National Treasure" with Nicolas Cage -- from a pair of cylinder-shaped vending machines at the front of the store.
The machines belong to Redbox, a company launched by McDonald's Corp. that executives hope could change the video rental industry almost as much as the Golden Arches changed Americans' eating habits.
For storefront video rental companies like giant Blockbuster Inc., Redbox is the latest competitive headache spawned by the decline of bulky videotape cassettes and the rise of lightweight DVDs. The success of the unheralded start-up Netflix Inc. showed that consumers would rent movies on the Internet and have them delivered by mail. Now Redbox, based in Oak Brook, Ill., will challenge video rental stores by making the process as simple and as cheap as using a Coke machine.
''It's really being seen as another way to make McDonald's convenient and relevant to customers," said Greg Waring, Redbox senior director of marketing. (Emphasis mine)
Redbox charges a dollar a day, plus local sales tax. In Connecticut, it comes to $1.06. There's no need to fill out a registration form before renting. All the user needs is a valid credit card. A renter swipes the card and picks the movie using a touch-screen video monitor. The DVD emerges from a slot, packed in a plastic case.
''We love it," said Rachel Zarrilli, 36, who shops with two young children in tow at the Glastonbury Stop & Shop. Zarrilli dreads visiting the local video rental store with her children. ''They run around, they go crazy," she said. ''And it's $5 to rent a movie."
Redbox charges no late fees. Instead, the customer is charged another dollar every day the movie is out. After 25 days and $25, the renter can keep the disk. To return the movie, people needn't go back to the original location. Redbox disks can be returned at any Redbox in the United States. All of the machines are connected to Redbox headquarters through a broadband digital network, so the company always knows which movies are most popular and which machines need servicing.
McDonald's launched Redbox in Denver last summer. Of the 550 Redboxes now operating, 181 are in Houston and 145 in Minneapolis. Most are located at McDonald's restaurants, but the company is testing them in alternative locations, including drugstores and supermarkets.
So far, users have rented 2.5 million movies through Redbox, and, said Waring, about 80 percent of first-time users have been repeat customers. About half of all renters return their movies after just one night, while only 1 percent of customers pay $25 to keep the movies.
By year's end, Redbox aims to deploy about 1,200 machines nationwide. Massachusetts won't participate in the current test-marketing of the machines, but Waring said Redbox plans to install machines in the Bay State ''as soon as we can."
Redbox is also scaling up the size of its vending machines, to offer consumers a better variety of movies. The current generation of Redbox machines, in use at the Glastonbury story, holds 100 DVDs. But Redbox just signed a deal with the California electronics equipment maker Solectron Corp. to build jumbo versions that will contain 500 disks apiece.
Waring said these larger machines will enable the company to expand its movie offerings. Right now, Redbox machines are stocked with the latest Hollywood releases. These are updated every Tuesday -- the day when movie studios issue their new DVDs. But with larger machines, Redbox might set aside space for older but still-popular films.
Blockbuster said it isn't getting into the vending machine business itself. That's different from how Blockbuster rushed in to Internet-based rentals to compete with Netflix.
''Right now we think it makes more sense for us to invest more money where our customers want to rent, and that's in our stores and increasingly online," said company spokesman Randy Hargrove.
Blockbuster entered the online rental market less than a year ago, and gained 750,000 subscribers in its first seven months, Hargrove said. The company expects 2 million subscribers by the first quarter of 2006. Hargrove estimated that online rentals will soon account for 20 to 30 percent of the market. He doubted that the vending machine rental market would be nearly as big, but added that Blockbuster could move quickly into the market if necessary.
Kara Clarkin is a convert. The 35-year-old said the Redbox machine made it easy for her to grab a video and still keep tabs on her 8-year-old daughter and her 18-month-old son.
''I like it because it's convenient," Clarkin said. ''It's right here."
Link: Like Coke machine for DVDs - The Boston Globe - Boston.com - Personal Tech - Business.
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