Can DVD, USB Kiosks Breathe Life Into Adult Rental?

Aug 28, 2009 8:00 AM PST
NEW YORK — Mainstream retail consulting firm NPD Group released the results of a study that found DVD kiosk chains such as Redbox have grown to earn 19 percent of the mainstream DVD rental market and are projected to rise to 30 percent by 2011.

This is a significant portion of the market share — subscription-based DVD rental services including Netflix own 36 percent, while traditional brick-and-mortar rental outlets such as Blockbuster take 45 percent.

These kiosks provide a convenience and affordability that consumers clearly appreciate — many kiosks offer $1-per-day rentals and are available in high-traffic retail areas — and NPD said just a few years ago, these kiosks represented less than 2 percent of the rental market.

"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."

Can kiosks like these breathe life into adult DVD rental? Will consumers frequenting adult stores be more likely to pick up a $1 rental on their way out of Hustler Hollywood or their local Lion’s Den?

“The market for the hard-good films will always be there, but the adult rental market has been notoriously tricky,” said Liz Wright, director of business development for video-on-demand giant AEBN — a company that understands consumers’ need for convenient and instant gratification. “There have been attempts in the web market to do something like Netflix, before that, the neighborhood shop would require a significant deposit.”

LFP Vice President of Operations Theresa Flynt told XBIZ that adult DVD rental kiosks might be something she’d test in one of Hustler Hollywood’s retail locations, but her outlook isn’t positive.

“Due to all of the free porn on the Internet, no one is paying for [DVDs],” Flynt said. “This is the biggest problem our industry is facing.”

However, Lance Ablin, president and CEO of adult kiosk system developer Flash n Go, thinks the “help yourself” convenience and accessibility of kiosks for adult items will be enough for consumers to catch on, and their easy distribution format is something that adult retail operators won’t be able to pass up.

“By making the access to a DVD or other product (or related novelty items) in a ‘self help’ format, rental/sales kiosks help the retail operator realize some human resource savings while at the same time providing a greater choice for the customer without taking up valuable floor space at their location.”

The Flash n Go kiosks take up about six feet of retail space — allowing other stores not immediately associated with the sale of adult hard goods, including gentlemen’s clubs to add a retail component to their businesses without the expense of storefront/inventory expansion or hiring additional sales staff.

Ablin said the company has been testing its kiosk systems — which offer DVD distribution as well as digital distribution via a purchased or rented USB key, available in separate or combo kiosks — and has gotten positive feedback, though he did not specify what retail outlets Flash n Go has appeared in to date.

“We are developing several opportunities for our retail partners to increase revenue by having our turnkey kiosks placed,” Ablin said. “This is an easy decision for all venues. We handle all of the placement and installation costs and depending on volume, offer the retail location a rev share deal. We even bring in our own DSL line to connect to box.”

He said the company developed a proprietary software platform that enables the USB-enabled kiosks to deliver optical and digital media, delivering content via the Internet directly to the Flash n Go boxes, making it instantly available to the customer.

The opportunity for adult kiosks is certainly open, but whether they’ll be available at your local laundromat or 7-11 convenience mart is still hard to imagine.

“While I see a definite plus for the mainstream market — being able to handle the rental when you're grabbing a gallon of milk and a loaf of bread — [adult kiosks] seem more problematic,” Wright said. “I have a difficult time imagining Whole Foods or Publix offering hardcore next to the produce aisle, though it might be beneficial to zucchini sales.”

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