Can see progression..McDonald's wades deeper into DVDs
By Bruce Horovitz, USA TODAY
Blockbuster has a very big-footed rival about to stomp on its turf: Ronald McDonald. McDonald's (MCD) on Monday will announce plans to begin testing DVD rental kiosks at all 105 Denver stores.
A DVD rental kiosk at a McDonald's in suburban Denver.
McDonald's
Smaller tests around Washington and Las Vegas had a huge response.
If the summerlong Denver test is a hit, McDonald's hopes to become the first fast-food chain to rent top DVDs nationally.
DVDs will be rented at Redbox kiosks, situated inside and outside restaurants. Rental fee: $1 a day — and they can be returned to any McDonald's. At Blockbuster (BBI), DVDs cost $3.99 for three days and must be returned to the same store. The McDonald's kiosks will stock the same top 30 DVD titles as video stores. The top 30 account for about 80% of DVD rentals.
The move could shake up both the $25 billion DVD business and the $105 billion fast-food industry. Over time, it could further blur consumer distinction among the convenience store, the fast-food joint, the gas station and the DVD rental shop.
Convenience continues to be the dominant marketing strategy of many of the USA's biggest retailers. About 29 million dual-income families have little free time to make extra stops for food and entertainment.
It's tough to top Mickey D's for convenience. While there are upwards of 30,000 McDonald's restaurants globally, there are about 8,900 Blockbuster stores.
Blockbuster officials declined to comment.
McDonald's isn't trying to put Blockbuster out of business. But it is trying to be more contemporary — and to lure more business during slow dinner hours.
"We are doing everything we can to be more relevant with everyday consumers," says Mats Lederhausen, managing director of McDonald's Ventures.
It's a very crafty — if not sensory — move for McDonald's, says Valerie Folkes, chairman of the marketing department at the University of Southern California. "They just want people to get inside, where they're subjected to the smell of those french fries. It's going to sell more food."
That is all McDonald's wants. Lederhausen says he doesn't expect to make money from DVD rentals.
DVDPlay, which makes the machines, says it can supply a national rollout. The kiosks also are being tested in some Albertsons supermarkets in Salt Lake City, says Dee Cravens, marketing chief.
McDonald's has long declined to share real estate with other businesses. This forces it to learn a new business. "It could blur the brand image," Folkes says.
But it poses far more trouble for Blockbuster, whose parent, Viacom, has plans to spin it off.
How to compete with McDonald's — besides on DVD selection? "Well," Folkes says, "I don't think you'll see Blockbuster selling burgers anytime soon."
