NCR Could Expand DVD Footprint As Blockbuster Downsizes
April 07 2010 - 1:52PM
Dow Jones News
NCR Corp. (NCR) is taking advantage of the shrinking
bricks-and-mortar movie rental business by tracking Blockbuster
Inc.'s (BBI, BBIB) widespread store closures to position its own
DVD kiosks.
NCR, best known as a maker of automated teller machines and cash
registers, is a recent entrant into the self-serve DVD rental
arena. The company, which licenses the Blockbuster Express brand
for its kiosks, plans to more than double its presence to 10,000
kiosks nationwide by the end of this year. But NCR isn't the only
one with its eye on markets Blockbuster is vacating and could face
stiff competition as it seeks to increase its presence.
"We know where the stores close," said Alex Camara, vice
president and general manager of NCR Entertainment, saying that the
company has been strategic in placing kiosks around those
locations. While NCR doesn't have a defined number of kiosks it
wants to place in each market, Camara said, "We're pretty
aggressive."
Camara said NCR has been acting in a similar fashion in response
to Hollywood Video store closures. Movie Gallery Inc. (MVGRQ) is in
the process of closing a number of Movie Gallery and Hollywood
Video locations after filing for Chapter 11 bankruptcy protection
in February.
Jeff Dudash, an NCR spokesman, noted that NCR partners with
other retailers, including Sheetz Inc. and Publix Super Markets
Inc. (PUSH), to actually house the kiosks. Camara said the company
will determine how many kiosks it wants to add to a market, then
approach the retailers regarding space.
J.P. Morgan analyst Paul Coster believes NCR could be putting up
to four kiosks in each of the 500-plus markets that Blockbuster
leaves this year. NCR is "taking advantage of Blockbuster's
withdrawal," Coster wrote in a note to investors.
Blockbuster spokeswoman Michelle Metzger said NCR is aware of
where the stores are closing, and "That certainly would be a good
strategy to put kiosks there."
Even though NCR has an in with Blockbuster, that doesn't
guarantee it will fill any void the rental company leaves as it
downsizes to help meet massive debt obligations. Coinstar Inc.'s
(CSTR) Redbox Automated Retail is also growing quickly with kiosks
in more than 20,000 grocery stores, retailers and even McDonald's
Corp. (MCD) outlets. Both brands of kiosks rent out DVDs for $1 per
night.
Gil Luria, an analyst with Wedbush Securities, expects NCR would
place no more than two kiosks in a given strip mall as Blockbuster
leaves the area. "But that assumes they get there before Redbox,"
he said.
A representative from Redbox wasn't immediately available for
comment.
While both NCR and Redbox have plenty of room to grow without
the market getting too crowded, Luria said, "We're getting closer
to that point of saturation."
Shares of NCR were recently trading down 0.2% at $15.07 and are
up 35% so far this year.
-By Melissa Korn, Dow Jones Newswires; 212-416-2271;
melissa.korn@dowjones.com
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