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In order to operate a DVD Rental Kiosk business I purchase movies about a month and a half in advance. Today is the only the first day of July and I have already ordered all my inventory half way through the month of August. Most everyone I have talked to orders as far out as they can which typically is six to eight weeks. What kiosk operators don’t all agree on is how many of each movie to purchase. If you don’t have enough of a big hit you will surely loose rentals and if you order too many of a movie that flops you operate with a loss.
How do you find the balance? How can you be sure that you order just the right number of each DVD to maximize rentals? You will loose customers if you don’t have enough of the big movies. However, with inventory being the largest expense (outside of the initial kiosk purchase) I have to be really careful about how many DVDs I buy. The information I am going to share with you is from my personal experiences and may or may not work for you. Your market may be totally different from the rural parts of Alabama that I service.
I have a little rule I created called the 10-50-100 rule. I purchase one DVD if the movie grossed over ten million, two DVDs if the movie grossed over fifty million, and three DVDs if it brought in more than one hundred million dollars at the box office. This week the movie Vantage Point starring Dennis Quaid is released. It grossed seventy-two million at the box office and I ordered two DVDs per machine. For the most part this little system has proven effective for the higher grossing movies in judging just how much product I needed for rentals. I’ll be the first to admit as my advertising push becomes effective I may have to tweak this system a little.
When I first started out I was purchasing only the big hitters. Movies like Die Hard with a Vengeance, Santa Clause Three, and Shrek the Third. I was ignoring the smaller titles and had customers asking for them. Beginning in February I started ordering the movies that did not fair so well and lowered the bottom tier to ten million. I have been ordering at least one DVD per machine if the movie generated just ten million domestically. How has this turned out? It is a mixed bag. I have several movies that have a one hundred plus ROI that only grossed ten to twelve million at the theater. All of my movies that have been in my machine over thirty days and have not produced a profit are from the ten to forty million dollar range.
In summary I have found the 10-50-100 rule works best for me. It gives me some hard and fast guidelines so I am not ordering movies based on emotion. Do I stick hard and fast to this rule. Of course not, I have varied a time or two from it. An example is the upcoming movie 21. I have ordered three DVDs per kiosk instead of two. You see, I am advertising pretty hard right now and am using the DVD Box art for the movie 21 that week in an ad. I would hate not to have the movie available for those people responding to the ad and those new to my kiosk.
For those of you out there that own a DVD Rental Kiosk, tell me how you decide how much inventory to order. Those considering a Kiosk purchase, I hope this has shed some insight into the decision making that a low volume owner has to make.
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7 responses so far ↓
1 Jason Simpson // Jul 1, 2008 at 10:43 am
Thank you so much for your blog. I am in the process of purchasing a DVD Kiosk, and your blog is the only first hand experience that I have been able to find. You inspired me to start my own blog about my journey through this process. There are more steps involved than I realized at first. I put a link to your blog on mine so hopefully you will get some extra traffic from that once mine starts to get rolling along. Thanks again for all your help, it is invaluable.
2 dondene // Jul 1, 2008 at 1:34 pm
your rule may work quite well most of times, but you also may consider genre of the movies too.
i run a local video store, not kiosk (but currently giving serious thoughts to it), but let me tell you, genre really matters!!
action titles always does way way better than other category movies with same box office gross.
suspense comes next, following romantic comedies, dumb comedies (e.g. nacho libre, napoleon dynamite…) and drama movies come last.
another factor you may consider is, your target customer profiles. i assume kiosk users are younger, more males than local stores and they are mostly toward to action/suspense/dumb comedy movies, consider that!
this is more of trial and error, so always review title rental history based on genre.
one of the stick measure you might have right now is, “meet the browns”.
it this title is doing well (i mean up to 70% of vantage point), you may have customers who are females, african-americans, or married males.
based on genre, find out if there exit a time during a day (not after 10 p.m ,though) when a title was all checked out.
for example, if all 2 copies of vantage point were out at a given time of the day, you need to stock more of those kind of movies.
i wouldn’t mind as much to ‘meet the browns’ though, because action/suspense movies are more like ‘i want to see that, right now!!!!’ kind of movie, while dramas are ‘i can see it next time if no copy is available’ kind of movie.
my comments are not really kiosks specific, but rather general video rental information. since you haven’t worked in this field, i thought my input might give you some ideas of running video rental store. i hope it helps.
3 dondene // Jul 1, 2008 at 2:56 pm
How has this turned out? It is a mixed bag. I have several movies that have a one hundred plus ROI that only grossed ten to twelve million at the theater. All of my movies that have been in my machine over thirty days and have not produced a profit are from the ten to forty million dollar range.
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how this happened, you would wonder.
let me give you my thoughts.
1) there are movies that movie lovers don’t feel like it worth of paying $10-$12 to the theatre.
mostly these movies falls into $10-$20 mil. BOX. These movies (especially with big name actors or heavy investments from studios) will do at least as good as $40 mil BOX .
Just because they didn’t go to the theater to see those movies doesn’t necessarily mean that they don’t want watch the movies. it’s just that they thought paying $10-$12 is too much for those movies, rather they will wait 3 months and pay $2-$4 and rent it!!!
2) High BOX hit doesn’t guarantee high rentals accordingly to it. $100 mil BOX hit doesn’t always produce 2 times rental of $50 mil BOX or 10 times rental of $10 mil BOX.
High BOX hit means that a lot of people already have watched too.
So, keep it in you mind you are mostly targeting “i didn’t watch the movie at the theatre but i heard about the movie and i want to rent it now” mind sets.
4 Jason Simpson // Jul 3, 2008 at 1:55 pm
dondene,
Great comments… I really like your perspective.
5 Diane // Aug 31, 2008 at 3:11 pm
Hi, I am considering buying two DVDNOW kiosks and am trying to decide best locations. I see numbers the company provided about avg rentals per day but are you really seeing in avg rental/day of your machines and what do you charge for your movies? Thanks so much for your help. I can’t afford to invest this money and have this be a bust.
6 Pete // Oct 30, 2008 at 11:05 pm
For you DVDNow owners - how much are you paying per movie? Insurance on your kiosks? Internet? I am drawing up a business plan for an SBA loan for one, possibly two kiosks, and need to find out these and other costs. If anyone out there can help me out I would greatly appreciate it - thanks.
7 Pete // Oct 30, 2008 at 11:12 pm
Also, how do the business owners respond when you approach them with the idea? What do they like about it or not like? What % do you give them for dvd rentals/sales/ad space revenue? How hard is it to get into a corporate-owned business like a supermarket?
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