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McDonald's to Expand DVD-rental Kiosk Locations, Including Supermarkets

OAKBROOK, Ill. -- "Would you like a DVD with that burger?" That's what McDonald's is asking as it expands its DVD-rental kiosk program.

Through its subsidiary Redbox, the fast-food chain -- which deployed more than 100 DVD-rental kiosks last year in the Denver area -- will expand the program to more than 1,200 locations by year's end, and plans to work with major grocery chains in its expanded DVD-rental program.

"We want you to pick up a DVD at McDonald's and be able to return it at the grocery store the next day," said Greg Waring, director of marketing for Redbox, which is based in McDonald's corporate offices in Oak Brook, Ill.

Redbox has already placed the kiosks at grocers that include Smith's Food & Drug and Stop & Shop. It is not known which other grocers will participate in the new McDonald's program. "This is really about making our restaurants as relevant to as many people as possible," Waring explained. "People like to sit down with food and a rented DVD. We're giving them a one-stop shop to do it."

Each vending machine, manufactured by Denver-based DVDplay, offers approximately 100 titles for rent at $1 per night per title. Renters pay with a credit or debit card. In the current program, titles can be returned at any McDonald's kiosk. If consumers hold onto any one title for 25 nights, the disc is theirs -- having already been charged $25.

McDonald's USA spokesman Bill Whitman would not confirm which cities are on tap for the expansion, although reports mention Houston and Salt Lake City. Neither Whitman nor Waring would comment on the profitability of the already deployed machines or financial projections tied to the program's expansion. "We put a lot of metrics in place to determine the success of the Denver machines," Waring explained. "We exceeded all projections."

Waring added that Redbox is working with McDonald's to "figure out the overall economics and how to split up the investment and revenue."

The corporation's long-term vision for the program, according to Whitman, is to focus on its convenience and value to customers. "It's a bit premature to speculate about where this may go," Whitman said. "We are identifying where it makes more sense to have a DVD- rental machine versus another location."

Newly deployed machines manufactured by Solectron will feature 500 titles each. Redbox works with distributor VPD to get product for the machines.

Consumers spent $5.7 billion renting DVDs in 2004, according to the Digital Entertainment Group, compared with $4.5 billion in 2003.
-- Jill Kipnis, Billboard, a VNU Publication
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