February 27, 2001 12:50 PM PST

Blockbuster rolls film on video-on-demand

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Blockbuster said Tuesday that it will host RadioShack kiosks inside as many as 5,000 of its video stores, a move aimed at helping the rental giant push into Internet-based services.

In a separate announcement, the company said it has gained rights to offer movies from Universal Pictures through its video-on-demand service, which is available in select test markets.

Both deals will help Blockbuster in its efforts to remain competitive as more consumers turn from VHS tapes to video-on-demand and DVDs.

When Blockbuster unveiled its video-on-demand trial late last year, it had movie rights from just a handful of companies, including Artisan Entertainment, Lions Gate Entertainment and its Trimark Pictures unit, and Metro-Goldwyn-Mayer. Adding Vivendi Universal's studio to this roster moves the company one step closer to a comprehensive library of offerings--seen as crucial to the program's success.

The company's partnership with RadioShack will further help its video-on-demand efforts by supplying a ready-made distribution partner for accompanying hardware equipment.

"When Blockbuster video-on-demand goes from its test phase to national roll out, we will need RadioShack to distribute set-top boxes," said Jim Notarnicola, chief market officer for Blockbuster. "We intend on working out an arrangement with RadioShack so that we have immediate national roll out."

Immediate benefits
The partnership offers immediate benefits, too. As Blockbuster slowly shifts its movie offerings from videocassette to DVD, for example, the company has found itself with more free space in its stores, which average 6,000 square feet. Leasing some of this space to RadioShack adds an income stream that can help with storefront costs.

"For some time now, we have been looking at alternative ways to increase our profit productivity in our existing space," said Notarnicola.

RadioShack will also bring high-speed Internet access into Blockbuster stores, allowing both companies to make their Web sites available via the kiosks and to offer customer demonstrations of video-on-demand and other services.

For RadioShack, the partnership gives the consumer electronics store increased exposure and access to a new demographic.

Blockbuster "attracts a lot of women and a younger audience, and we attract mostly men and people over the age of 30," said RadioShack spokeswoman Kay Jackson. "They also get a lot of families; an average of three people will come in to pick out a movie. A lot of times there will be someone kind of roaming around bored, while the other people are picking out the movie. We see this as a tremendous opportunity."

Lehman Brothers analyst Alan Rifkin described the alliance in a research note as a "clear positive" for RadioShack, "giving the company access to Blockbuster's 48 million accounts, further expanding RadioShack's national retail presence through a distribution channel."

The consumer electronics company plans to sell a host of products at the kiosks including televisions, radios and cell phones. The company also intends to sell services offered in its own stores, including MSN Internet access and cellular phone service from partners Sprint and Verizon.

The first 130 in-store kiosks are scheduled to open in May and June in Las Vegas; Austin, Texas; Tulsa, Okla.; and North Folk, Va. A national launch is expected to follow late in the first quarter of 2002, the companies said.

 

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