Will Digital Video Vending Make Itself Obsolete?

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Will Digital Video Vending Make Itself Obsolete?

Retailers should grab digital video sales while they can.

We’ve all seen how DVD rental kiosks such as those by redbox and NCR’s Blockbuster Express units have caused the demise of the traditional video store format. After all, why should I make an extra trip when I can just pick up my groceries and a week’s worth of videos at the same time with the swipe of a credit card?

While the DVD vending kiosks have a relatively small footprint — and can even be placed outside the store, such as with the new NCR unit — some retailers may not have the space needed for them.

Not to worry, though. The ever-declining price of recordable media — which allows me to buy a 1 terabyte hard drive for under $100 — will also shrink digital video vending units to the size of a countertop unit.

NCR demonstrated such a unit at this year’s National Retail Federation (NRF) show, held in New York earlier this month. The unit, which is being tested at select retail locations, allows users to buy a movie and have it downloaded to an SD card, which can then be played in many SD-accepting devices, such as computers, set-top boxes and even some TVs. The digital media is coded so that it has a limited life after it’s first played, and more than one video can be downloaded to high capacity SD media.

The flip side to this, however, is that ever-increasing bandwidth means that eventually even these smaller kiosks will be irrelevant, as consumers increasingly bypass the kiosk altogether and download videos directly to their computers, which will be networked to their TVs or video game consoles. And, eventually, they’ll just download them or stream them to their mobile devices.

Grocers still have one advantage to holding onto digital video sales as vending units become obsolete, and that is all of the other products in their stores that these videos can be cross-merchandised with.

A few years back, I wrote a story about how Cub Foods successfully competed against Circuit City and Best Buy for sales of the then-newly-released “Finding Nemo” by making a deal with CPG companies to give away free products with a video purchase. The consumer electronics stores couldn’t do that.

Perhaps digital coupons may provide such a similar cross-merchandising opportunity with videos years from now, and give movie fans a reason to skip the Netflix Web site.