DVD Vending Machine

The big red vending machine at the McDonald’s whirrs and hums and spits out rental DVDs of Chicken Little and King Kong.

Machines run by McDonald’s Corp. subsidiary Redbox Automated Retail have popped up in hundreds of Golden Arches restaurants in six cities in an experiment to see whether they drive more customers into the stores. Rental chain Movie Gallery is experimenting with DVD rental machines, too, saying the machines will make rental transactions easier for customers and make its stores more efficient.

The spread of DVD rental machines comes as rental stores are struggling under a business model that hasn’t changed much from the mom-and-pop video stores of 20 years ago. The rental business has suffered from the sale of inexpensive DVDs, rent-by-mail services, such as Netflix Inc., and expanding video-on-demand from cable companies.

“We think it’s a tremendous opportunity,” said Greg Waring, Redbox’s vice president of marketing. “We think we’re providing a new model for the industry that is going to be difficult for the traditional retailers to compete against.”

About the size of a soda machine, each “Redbox” holds 500 disks and includes a touch screen so customers can pick a movie, and a credit card reader for paying the $1-per-night fee. Customers return the movies at the machine.

Signs near the machines promote its movies. Redbox staffers load newly released DVDs each Tuesday.

Redbox workers at the headquarters in Oakbrook Terrace, Ill., can monitor which titles are renting the most in each machine and adjust their selection accordingly. Generally there are 50 to 60 individual titles.

Chris Kliner and his daughters Olivia, 5, and Annaliese, 4, select a rental DVD from a Redbox before eating at McDonald’s in Apple Valley, Minn. The Kliners, who were visiting from Kenosha, Wis., said they appreciated the convenience of not having to sign up just to rent a single movie.

This summer, the company plans to let customers go online to check title availability in a particular location and rent a movie on the spot for pickup at that machine later.

In Apple Valley, a suburb of the Twin Cities, Chris and Teresa Kliner stopped at a McDonald’s for both a meal and a copy of “Chicken Little” for their daughters to watch during a visit with relatives in the Twin Cities.

“With kids, it’s easier this way, because they’re not running all over the store,” Teresa Kliner said while daughters Olivia and Annaliese played on the slides at the restaurant’s indoor playground.

Jeff Smith, a McDonald’s franchisee who owns seven restaurants and runs a cooperative that buys advertising for Twin Cities McDonald’s, said he doesn’t know whether the DVD machines are bringing in more customers because there are so many other variables, like the weather and promotions, affect whether people eat out.

But he says his customers love the machines.

“The only thing I invest is my space,” Smith said. “We don’t get paid anything, and it doesn’t cost us anything to have it.”

Other Vending Machine Applications