Thornton – The line outside the McDonald’s at 120th Avenue and Colorado Boulevard was three deep the afternoon of Saturday, Oct. 8.
Dinner approached, but the people hadn’t come for Big Macs and Happy Meals. Instead, they queued up for $1-plus-tax DVDs dispensed from two Redbox DVD rental machines perched outside the store.
“I haven’t been to a video store in a year,” said Melanie Skinner, 21, of Thornton as she and companion Brad Messenger used the machine’s touch screen to select horror flick “The Ring Two.”
Oak Brook, Ill.-based McDonald’s has spent a year testing so-called “video vending” at more than 100 of its Denver-area stores. Deeming the Mile High City effort a success, the hamburger giant, which operates Redbox as a subsidiary, recently expanded to Baltimore, Houston, Minneapolis, Salt Lake City and St. Louis. It aims to take the program national but hasn’t said when.
The popularity of the machines, which take credit and debit cards only, can be attributed to one thing.
“It’s cheap,” said Theresa Goebel of Thornton as she and her husband, Doug, rented a “Family Guy” DVD for their kids. The $1-a-night fee is a steep discount compared with competitor Blockbuster, which charges $4.49 for a two-night rental of a new release, or Hollywood Video, which charges $3.99 for a five-day new-release rental.
Elsewhere in Colorado, grocery chain King Soopers, a division of Cincinnati-based Kroger, is testing DVD machines in a handful of Denver-area stores, and some area military bases also sport a version of the machines.
The video-rental machines have one thing in common: They provide a new challenge for traditional video and DVD rental outlets already hit by competition from online rental firms Netflix and video-on-demand technology.
McDonald’s estimates it has grabbed more than 10 percent of the local DVD rental market. In the metro area, video vending machines churn out 200,000 rentals a month, according to Video Business, an industry publication. Additionally, store sales have shot up as much as 20 percent when DVD revenue and additional business generated by the extra traffic is factored in, according to the publication.
“I think you’re going to see more and more (machines) in the future,” said Sean Bersell, vice president of public affairs for the Video Software Dealers Association, which represents video-store owners.
Still tiny share of market
Nationally, DVD rental machines still are a tiny share of a market dominated by chains such as Blockbuster and Movie Gallery and online rental firms such as Netflix.
But that could change as more retailers experiment with them:
Rental giant Movie Gallery in August said it is testing machines although it would not specify how many machines or where they are.
New York drugstore chain Duane Reade is placing machines in all of its stores.
San Antonio-based Tejas Videos operates machines on military properties throughout the country, including the Air Force Academy, Fort Carson and Buckley Air Force Base in Colorado.
Blockbuster, the No. 1 rental chain, says it has no plans to use the technology in the U.S. However, Blockbuster has 42 machines in Spain and its Israeli franchisee operates several dozen.
“Right now we’re investing our money where the majority of our customers want to rent, and that’s in stores and online,” Blockbuster spokesman Randy Hargrove said.
Nontraditional outlets – including vending machines – represented just 2.5 percent of video rentals nationally through August, compared with 77.3 percent for brick-and-mortar stores and 20.2 percent for online rentals, according to research firm The NPD Group Inc.
McDonald’s Redboxes are the result of a company initiative launched in 2002 to determine how the company could best use vending machines to draw more people into its store. The company tested machines that offer French fries as well as convenience-store items such as Advil and potato chips. The company scuttled its other vending projects after hitting on the DVD concept, which gives consumers an incentive to visit stores and possibly make food purchases while they’re there.
The company tested the concept in Denver because it is a strong McDonald’s market with diverse customers and a concentration of families, said Greg Waring, senior director of marketing for Redbox.
Thornton store busiest
The Thornton store at 120th Avenue and Colorado has emerged as the busiest Redbox in the metro area, even though business at the McDonald’s is average, according to McDonald’s spokeswoman Carolyn Gust.
Here, and at other high-volume video locations, the company has placed two machines side by side to accommodate demand. It’s also in the process of replacing all Denver-area machines with higher-capacity units that hold 500 DVDs compared with roughly 100 held by existing machines. The machines typically offer a selection of 40 new-release titles and are updated with new titles every Tuesday.
McDonald’s places the machines both inside and outside its stores, depending on the layout of the store and local regulations. Generally, outdoor machines do better, and most rentals tend to occur in the evening.
Skinner said price is the main reason she frequents Redbox, although she noted that its format limits her only to new releases. That Saturday, she also arrived to find the machine out of the title she wants.
“It’s not a big deal because there’s a McDonald’s on every corner,” she said.
Most machines stock the same titles, although some machines will have slightly different selections based on the machine’s previous rental history, Waring said.
Farther down the street in Thornton, Kroger-owned King Soopers is testing a machine from Houston-based The New Release Inc. at 104th Avenue and Washington Street.
New Release machines hold 400 to 1,000 DVDs. Their 200 titles include both new releases and some older titles, said Brooke Stuckey, a spokeswoman for The New Release. The company also charges $1 a night.
King Soopers is testing Redbox machines at other locations. The company has so far placed eight machines from the two companies in stores that do not already have in-store video-rental services.
“It allows us to put in a unit without the additional cost of putting in a full-service video-rental area,” said King Soopers spokesman Trail Daugherty.
Using a Redbox is simple
While using a Redbox isn’t as easy as buying a cola from a vending machine, it’s still pretty simple.
Customers use a touch screen to make their selections. The machines charge a customer’s credit or debit card a dollar per night that the DVD is out. DVDs don’t have to be returned to the same Denver machine where they were rented.
If a customer does not return a DVD, the machine will stop charging the customer’s card once $25 in nightly fees has been reached. The machines also offer promotions, such as a current deal offering free rentals on Monday nights.
Receipts can be e-mailed to customers who request them.
While the company says Redbox visits are often accompanied by food purchases, customers who used the machines that Saturday said they rarely buy food when renting or returning their DVDs.
“We just get the videos and leave,” said Goebel.
Staff writer Kristi Arellano can be reached at 303-820-1902 or karellano@denverpost.com.
