October 28, 2004 7:46 AM PDT

Would you like a DVD rental with your Happy Meal?

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for content for another five to seven years, Horstmann said. Between now and then, the kiosk company hopes to combine the instant gratification of retail with the low prices of the mail order crowd.

Cheaper movies
The DVDPlay kiosk essentially eliminates much of the labor and real-estate costs with movie rentals, which is not an efficient business. The vast majority of square footage in movie rental outlets is taken up by storage. Two of the systems can save a rental outlet $75,000 a year, Horstmann said.

With the kiosks, movies can be rented for bargain prices. Movies from the kiosks generally rent for 99 cents to $1 a day, compared with the $3 to $4 often charged at standard rental outlets. Some retailers may also give free movie rentals as specials if, say, a shopper buys $50 or more of groceries.

One chief disadvantage is that the machines hold only a limited number of movies. A small version holds 100 DVDs, while a larger one holds 350. Consequently, DVDPlay kiosks will offer only the latest releases.

The company garners revenue in two ways. Many customers, such as McDonald's, will buy the machines and retain the rental revenue themselves. The units cost about $12,000 each; DVDPlay also charges a $1,000 annual maintenance fee. With Safeway and some others, DVDPlay will retain ownership of the systems, and the two will divide the rental revenue.

The DVDPlay box looks pretty much like a self-service photo kiosk or an ATM. An LCD screen that sits on top of the kiosk plays movie trailers, while the body of the system, which holds the DVDs, is festooned with advertisements and a credit card slot for transactions. It takes up 4.5 square feet of floor space.

"It can be moved with a hand truck" and takes about 20 minutes to install, Horstmann said.

Internally, the kiosk is based on PC components. All of the units are hooked up to the Internet so that a manager in a central location can examine what gets rented. In the McDonald's trial, an IT specialist in Chicago controls the Denver systems.

Nuance. Several of the 36 employees worked with each other at various times at AdForce, Sun Microsystems and Apple Computer.

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