While doing some research on DVD rentals, I came across the growing role that DVD Kiosks are playing in the market. DVD kiosks are DVD vending machines that rent out titles for around a $1 a day. The two main DVD Kiosk service providers are DVDPlay, a VC funded company, and Redbox, which is owned by McDonald's and Coinstar (CSTR).
I have not seen much of them, but apparently there are 10,000 such kiosks, typically at supermarkets, each generating $30-40K in annual sales. They are expected to garner 25% of DVD rentals by 2011, according to Bloomberg.
This is likely to represent another threat to Netflix/Blockbuster's traditional DVD-by-mail business model. DVD Kiosks would likely require much lower operating costs and capital, and offer convenient 24-hour access. The number of titles may be relatively limited at a kiosk, but that number should likely include the top hits that people are most likely to to be interested in
In addition, USPS said that they may charge a 17 cent surcharge on Netflix mailings, because their mails require special manual handling. This could potentially result in NFLX's operating income per subscriber to decline by 67%, from $1.05 to $0.35. I think that they will soon renegotiate the surcharge or redesign the offending aspects of their envelopes, so the impact may not end up being that drastic.
