Netflix changed the way people rent movies, drawing
customers who wanted more selection and no late fees
away from Blockbuster and other rental storefronts.
Now Houston-based New Release is trying to cash in
on another DVD-rental niche with 1,150 automated kiosks
stationed in grocery stores in 13 states. Each machine
holds about 1,000 discs and 200 to 250 titles with rentals
for just $1 a day. Houstonian John Osborne started the
company in 2002 after being inspired by similar machines
in Europe.
Now CEO Richard Cohen, a former Disney and MGM studio
executive, says the company plans to have 5,000 kiosks
in supermarkets across the country by the end of 2008,
and it's working with IBM on a system to tailor the
movies in stores based on the demographics of the neighborhood.
He spoke to Chronicle reporter Brad Hem.
Q: Your biggest competitor, Redbox, which is partly
owned by McDonald's, has its kiosks in fast-food restaurants,
while the New Release has focused on grocery stores.
That seems like a very symbiotic relationship. Why does
it work?
A: It's a very natural fit. It's very simple. It's
so simple it's extraordinary. They don't need to make
a special trip to make a return. They're going back
to the market anyway.
The markets like it because it's yet another way to
get people back into their stores. It's a multiple win
for them. They make a lot of money with no capital investment.
In addition, it's a reason for people to make multiple
visits to their stores. People buy other things while
they're in the store, not just the DVD.
If we made money off of burger sales in addition to
movies, (restaurants) might be interesting to us.
Q: You seem to have a found a niche that movie-rental
dominators such as Blockbuster and the mail-order version,
Netflix, have missed. What are you doing that is different
from them?
A: What we offer is enormous convenience, instant gratification,
a very low price, opportunity for impulse. There's no
need to make a subscription. They can rent one movie
from us. They can rent 100 movies from us. It makes
no difference for them.
Netflix users have to wait for the mail to get their
movies. Blockbuster and other storefront customers have
to make another stop on their way home.
We can't compete with Blockbuster on the basis of the
number of offerings, but Blockbuster can't compete with
us in terms of convenience.
Q: Your company is called the New Release, so obviously
you carry the latest movies out on DVD, but you also
rent a variety of older movies. How do you decide what
people will want?
A: We add new releases once a week, but the right ...
(older) movies can be very, very popular, and the margins
are better because they're cheaper to buy. If the film
was successful, there's a long tail on the demand.
Then there are what you'd call classics, not necessarily
artistic classics, though sometimes they are, but classics
in terms of visibility and demand, films like the Terminator
films, the Bond films, Titanic, all the great films
of the last 20 years, the kind of movies someone would
rent on impulse.
Q: TNR recently announced it had hired IBM to create
technology that will allow you to tell which movies
are popular in certain stores. What will you do with
that information?
A: We will be able to tailor each kiosk to the customer
profile and the demand structure of the individual store.
We're about to get much more sophisticated.
When it's a family-oriented thing, we'll have more
family. When the demographics are different, we'll have
more working class or more academic or more ethnic —
whatever it might be. We'll have the right market in
the right place.
Q: What is the future of DVD-rental kiosks? Will you
be able to have an unlimited catalog and burn movies
to a disc or download to a memory stick while the customer
waits?
A: There's potential for that. I don't think a technology
revolution is imminent, but in the next couple years
it will be. Even though it seems fairly simple, as a
practical matter it's not that easy.
Immediate burning or downloading is difficult now because
it is slow and expensive. There are still issues with
storing blank discs and packaging the product. But the
biggest obstacles are the studios who hold the copyrights.
They don't want digital files of their films sitting
out in the world where they can't control them. For
them to get the kind of royalty rate that they're used
to getting, there isn't enough margin left for anybody
else. |
