NCR Says Its Blockbuster Express Kiosk Will Expand Mix of Day-and-Date Movies
NCR’s direct distribution pact with Universal Studios is the first of “several” agreements it will sign in the next few weeks for Blockbuster Express DVD and Blu-ray rental kiosks, NCR’s CEO Bill Nuti said on an earnings call.
The Universal deal allows NCR to “selectively” test renting movies day-and-date with their release on DVD and Blu-ray, said John Bruno, executive vice president of NCR’s industry solutions group. The kiosks also will be able rent titles in a 28-day window that rival Coinstar’s Redbox has as part of direct pact with Warner Brothers and others. The day-and-date films will be rented at a “slight premium” to those with the 28-day window, Bruno said. Blockbuster Express typically charges a $1 nightly rental.
Deals with Universal and potentially other studios could produce savings for NCR, whose Q3 capital expenses rose to $69 million from $53 million a year partly because of its growing entertainment business, company officials said. NCR has opened about 7,500 of the 10,000 Blockbuster Express kiosks it planned to install this year, Bruno said. Among the largest installations are at Safeway (1,300 stores) and Publix (1,000). NCR’s Blockbuster Express recently replaced Redbox at the 207-store Bi-Lo grocery chain.
The expansion comes as NCR is forecasting that its Q4 entertainment business will post flat to “slightly positive” earnings before interest, taxes, depreciation and amortization (EBITDA), Nuti said. NCR’s entertainment group will post $25 million to $35 million in EBITDA in 2011, he said. The EBITDA improvement will come partly from savings from the agreements with Universal and other movie studios, Bruno said.
"There is an improvement in the direct relationship and the acquisition cost and how that will drive profitability rolling out our kiosk and digital download solutions,” Bruno said. The pact with Universal “enhances our competitiveness,” he said.
To secure the new deals with movie studios, Blockbuster Express needed to increase its “size and scale” and extend its offering beyond rentals and “explore other opportunities,” Bruno said. Among these is NCR’s investment in kiosks with MOD Systems, which developed a download to SD card system, and deployment of them. InMotion Systems has deployed MOD’s system in Download2Go kiosks in 20 stores in 12 U.S. airports and wants eventually to expand beyond airports, Bruno said.
Despite Blockbuster’s recent filing for bankruptcy protection, NCR continues “to enjoy a terrific business partnership” with the chain, Nuti said. The Blockbuster Express kiosks are an “important innovation” for the rental chain as it restructures its business, he said. The kiosk business “resonates well” with consumers, Nuti said.
Meanwhile, NCR’s Q3 net income improved to $83 million from $15 million as it recorded a $39 million tax benefit from valuation reserve at its Japanese subsidiary. NCR’s profit rose despite a $17 million impairment charge tied to an equity investment and a $6 million charge for litigation related to the $875 million clean-up of the Fox River in Wisconsin. Appleton Papers and NCR this year appealed a dismissal of their claim for contributions from other operations that discharged into the river. In December, Appleton and NCR were found to be the most responsible for the flow of PCBs into the Fox River in the late 1960s, during Appleton’s peak production of NCR’s carbonless copy paper for cash registers. NCR produced a capsule emulsion product containing the PCBs at plant in Portage, Wis., starting in the 1950s. NCR also recorded a $50 million expense related to pensions during the quarter and incurred $6 million in costs related to moving its headquarters to Duluth, Ga., from Dayton, Ohio. NCR’s Q3 revenue rose to $1.21 billion from $1.14 billion, led by a 10 percent increase in sales of equipment in the Europe-Middle East-Africa region.