Do You Like to Do It Yourself? How Blockbuster Ended Up in the Self-Service Biz.

Turns out, Blockbuster really doesn't have much to say about its decision to partner with NCR to test-market those digital kiosks that allow users to download movies to SD cards. Randy Hargrove, the company's spokesman downtown, called back today only to say that "they'll be in our stores and be Blockbuster-branded, but as far as the details, NCR is gonna be your best bet." And, sure enough, it was: Alex Camara, vice president and general manager of NCR Entertainment, phoned Unfair Park from the Kioskcom self-service expo in New York to explain the endeavor -- and to defend the decision from critics and cynics who think this just one more attempt by Blockbuster to stave off its inevitable demise.

More about that after the jump. But if you're at all curious about what these things look like and how they operate, you're in luck: NCR, manufacturer of most of the nation's ATMs, is only rolling out a handful of these kiosks in coming months, and two of them will be in Dallas -- at the Blockbuster in Preston Royal Shopping Center, and the one at 14891 Preston Road. The one in Preston Royal makes its bow November 17, according to an NCR publicist; the one near Belt Line Road goes live first thing tomorrow morning. Will you become an early adapter? Do tell. (Update on Wednesday at 12:24 p.m.: NCR just called to say that today's installation won't be happening today after all. Matter of fact, it has been delayed till "early next week." Dang.)

NCR, incidentally, is the same company behind Blockbuster Express, the company's $1-a-rental kiosks that are intended go to head-to-head with RedBox. Right now, there are about 1,000 of them nationally -- with only a handful of them in North Texas, in places like Rockwall, Wylie, Forney and McKinney -- with plans to expand to 10,000 by the end of 2010. But not before Blockbuster dips its big toe in the digital waters. So, then, jump for more, but keep in mind this link will expire 48 hours after opening. Or not.

How long has NCR been working on this specific kiosk?

What happened was, well over a year ago we made an investment in MOD Systems, which is a digital-content specialist from a software point of view. We knew at some point that there would be much more of a digital focus for the consumer, not just standard DVDs, and the MOD approach has been to start with SD cards. For one, the SD card has the DRM encryption on it, which allows us to download movies in a way studios are happy with. Most other devices or cards don't have that protection. So the protection of DRM and the ability to download onto SD means you can have the rental expire after 30 days. Or you have 48 hours to watch as much as you want as soon as you open it. That's why SD is the first choice.

There's been some jeering over the choice of the format -- because, after all, not everything has an SD port. ...

Well, you can use an adapter and a USB port. ... But this is just the beginning. Eventually there will be software that allows you to download off a mobile device or your computer.

Obviously, this isn't for iPhone users.

Those are fairly proprietary. You're buying Apple product. But the majority of new televisions being developed have SD slots. New phones have mini-SD slots. It's more ubiquitous, especially as you look at what Toshiba and Samsung and others are rolling out. What's also happening -- and this will help -- is the studios we've been working with, like Warner Bros. and Paramount, they're interested in this, and as you get more of it into the marketplace, and as SD becomes the prime format, you'll see more devices with SD. But you have the dongle already out there -- all you have to do is plug it into the USB port.

And the other benefit of SD is the speed. At the moment, we're downloading standard-def movies at the show here in two minutes. And SDXC next year cuts the time in a quarter; you'll be able to download a high-def movie in the same time.

Obviously, Fast Company made a mistake with the price -- it's not $4, right, but $1.99?

We're testing different prices. At the moment it's $1.99. Standard video on demand right now is at the $4 mark. It varies depending on the age of the movie, but new movies are $3.99. We're launching this week and developing the price platform, but we believe over time we'll become the replacement for the physical DVD market. We believe physical DVD media will be around for many years to come, however we also believe we need to watch out for a replacement. And for the next few years, the replacement will be digital rental. And that's done very simply with these kiosks. You can go to a Blockbuster Express, rent a DVD or even buy one, or you can download a movie.

But if you and RedBox are delivering $1 rentals in the kiosks, why should people want to pay more to put it on their SD cards? Assuming they own one. And assuming they have it with them at the time.

What's going to happen are a couple of things. Video on demand at home is $3.99, and you'll see over time this will become the replacement for DVD rental. We're going to work over time to find the right price point to see what's the greatest value. Will it be $1 a night digital rental? I don't think so. The studios want to make sure there's an ecosystem they can survive in to continue to make great movies. What's that price? I don't know.

Now, a year ago Blockbuster debuted the Archos kiosk, which seems like an awfully bad idea -- who had one of those?

We learned a lot from it, but it was the forerunner to what is today a good consumer kiosk. The thing is, with this digital kiosk, people really seem to enjoy the experience. For instance, what I like about this is that people can download more than one movie -- they do two or three at a time. Some people say they'll go to a Blockbuster Express kiosk for the $1 rental, but when they hit one on a Friday night, they have to wait 10 minutes. Now, it's a great service. However, here I can go in on a Wednesday and download three movies. I have 30 days to hold on to the card, which means I can go pick up my movies for the weekend -- my son's, a drama for my wife, something for the family -- and then watch it on my own pace and not have to line up Friday night and risk returning a disc late.

Netflix taught Blockbuster people hate going to stores -- why bother when someone can just send you a movie in the mail and not charge you a late fee? RedBox taught Blockbuster that people like getting movies wherever they happen to be, like, say, a 7-Eleven parking lot. Whenever we write about Blockbuster and its latest attempts to keep up with set-top box downloads and its own mail service or self-service kiosks, there's often the criticism that the company was simply too late to the party -- it didn't understand that it's about convenience and customer service. What's different this time?

I think what Blockbuster has done is they have recognized over the years, "We're not self-service specialists. We're movie people." About 18 months ago they came to NCR. We're the largest self-service specialists in the country; we do 60 million transactions a day. They said, "We're a movie company. We have our strategy, but we're not a self-service company, and we don't operate outside of our stores." They said, "Can we work with you?" And so that's how we came up with Blockbuster Express, and we've been successful. Do I wish we'd done it two years before? Yes. But we'll have 2,500 by the end of the year and 10,000 in 2010. And now we have digital.

And customers love self-service. Look how quickly airports have turned from manned counters to self-serve kiosks. That's happened in five years. And your point about convenience is important. People are at supermarkets, 7-Elevens, airports, and our aim is to put these kiosks in locations where you don't even have to get our of your car. We've just put a Blockbuster Express in a Sonic in the Houston area. You drive in, get your burger and fries and get a movie for the weekend.

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Robert Wilonsky
Contact: Robert Wilonsky