15 Feb 2012

DVD rental market facing shake-up

7:09 am on 15 February 2012

The DVD rental market faces a shake-up this year as competition heats up in the industry.

Traditional video stores face closure as they lose market share to free to air digital channels, online sites and piracy.

The latest newcomer to the DVD rental market, vending machines are set to arrive in New Zealand by the end of the year.

In Australia the co-founder of Hoyts-owned Oovie DVD vending machines Ian O'Rourke says the machines are convenient and low cost.

He says his company has machines which are like Coke machines, but with a touch screen, through which people can access movie titles.

Mr O'Rourke says users pay for it using a credit card and can then return the DVD to any other Oovie machine.

He says the machines are located in places such as supermarkets or shopping centres and are typically less than half the price of what a regular store will be charging for a new release.

It's reported that Australia's biggest player, Franchise Entertainment Group, which also owns Blockbuster in New Zealand, has recently invested $19 million on 1000 DVD vending machines and kiosk businesses.

The joint managing director of rival Video Ezy, New Zealand's largest movie rental franchise, Kevin Peterson is closely watching developments.

He says bricks and mortar stores in smaller towns are probably uneconomic now and Video Ezy will be assessing whether the kiosk model is a success.

Mr Peterson says as the vending machines offer only new releases there's still a place for the traditional store.

But Ian O'Rourke says his business is expanding quickly and if Australasia follows the US, the days of the video store are coming to an end.

He says in the USA the kiosks have gone from almost no market share to near dominance in the last five years.

Mr O'Rourke says 40 to 50% of rentals are done through kiosks and video stores have almost ceased to exist.

He says Hoyts has no date yet for installing Oovie machines in New Zealand.