Written by Shawn on June 18, 2008 – 6:30 am
The machines have been placed and operational since November of 2007. So let’s get right down to it. How are they doing? Have all my expectations been met? Will we invest in more machines? Are DVD Rental Kiosks a good investment?
Every new business owner should know going into a business venture that it may take months and even years to get established and to start turning a profit. You learn not to get overly excited about good days and to squelch your discouragement on the slow days. I knew it would take some time to get up and going. I knew that the first few weeks in business would not bring me a huge financial windfall. The kiosk rentals did start off slowly. A few rentals each night for the first few weeks. As I put new movies in and the total inventory count climbed I had one machine doing well and one that was lagging. This was the kiosk in the city with 14,000 people. It was in the busier of the two grocery stores. What was going on, why was this kiosk not doing well?
I started a coupon promotion and everyone I saw in both towns was given a coupon for a first night free. I gave out more than two hundred coupons over the course of a week. It did pay off in the smaller town but not in the other. In the larger town, I had the local newspaper run a feature article about the new dvd rental kiosk. I had front page coverage and thought for sure it would make a positive impact. Long story short, it did not. I promoted the machine with fliers and coupons that were placed in employees check stubs at various industries throughout the city. All the while my other kiosk was closing in on enough rentals a day to break even. That number is seven. All I needed was seven rentals per day at each machine and I would cover all operating costs.
The first two months operating numbers were
- total rentals: 399
- rentals per day at each kiosk: 3.3
We had more work to do. I needed the rentals per day to be at least seven so my expenses would be covered. In order to start recouping some of my investment on the kiosks I needed a lot more than five per day.
To make a long story short, I moved the kiosk that was doing so poorly. It was no trouble finding a new home for it. I simply asked the owner of the grocery store where my other kiosk was located, if I could place my second kiosk in their other store. The answer was yes. The other store is in a similar type town. It is very small with no chain rental stores. The machine instantly performed much better.
My average daily rental count is just over seven per kiosk. I am making enough to cover my expenses but it is not too awfully impressive yet. In order to meet my goal with an ROI of just eighteen months I will need to have a daily rental rate of just over twenty-two per machine.
I have only been in the DVD rental business for eight months and am not meeting the goals I had set for myself. I have had some location trouble at the first grocery store I chose. The newer location is better but still is not spectacular. I am going to push the envelope with advertising over the next few months hoping to drive in new customers. Each and every week I talk to someone from either town that is clueless about what a DVD Rental Kiosk is. If they watch rented movies and don’t know about my machines then I am well aware that I am losing money.
In a nutshell. I am disappointed that I am not renting fifteen to twenty movies out of each kiosk daily. I am encouraged that the daily rental count is going upward and should be at my target level in time. Another possible source of revenue that I have not been successful at is advertising in the display panels. I have pursued several businesses about advertising possibilities. While some managers seemed slightly interested others saw no need in it. In small town Alabama I am not too sure businesses feel the need to pay to advertise at the local grocery store. Oh yeah, both stores have a bulletin board they allow the community to utilize for free.
Some facts to chew on as we wrap up.
- My average customer rents a movie 1.78 nights
- My average rental count at each kiosk is 7.2
- My best day for rentals is Friday
- The best times are between 5 and 7 PM
- I am selling 12.8 movies per month through the machine
- Average selling price is $17.63 (keep in mind some of these are forced charges for movies not returned)
- In order to meet my goal of ROI in 18 months I need a daily rental rate of 22 movies per kiosk
My biggest expenses:
- Insurance (liability, machine replacement and content)
- Purchasing the movies
- Leasing the space to place the kiosk
So, let’s answer the question. Are DVD Rental Kiosks worth the investment? Would I re-do this investment again given the opportunity at a do-over? My short answer would be no. I would not do it again because of other reasons however I do feel like there is potential in the DVD Kiosk world. I really do think that by the end of this year I will be renting twenty-five or more movies per night from each kiosk. According to my figures, once the ROI has been fulfilled and if a kiosk can rent twenty-five movies a day, at the end of one year that machine will bring in close to $15,000 profit. If you ask me, that is not too bad. Depending on what ROI you expect and the locations you pick, there may be a future for you in the DVD Rental Kiosks business. I think the investment is worth the risk so long as you find the right location and are willing to market your machine. Good luck.
If you have any questions or comments feel free to post them.
Related posts:
- DVD Kiosk: 10 things to expect as a store owner What is all the hoopla surrounding this dvd rental...
Related posts brought to you by Yet Another Related Posts Plugin.
Love the posts! I am considering investing in a kiosk and I thank you for openly sharing all of your experiences.
No problem, I hope it helps you and many others. I noticed when I started looking into DVD Kiosks there was not that many places to turn. While there are more sites on the web now, most of it is paid advertisements. Feel free to contact me from this site any time with questions.
How much does the insurance cost (liability, replacement and content)? Did you use any locating companies? If yes, who are they and your experience with them.
Thanks.
I used a local company that administers policies for several insurance providers. The best price I could get with a reputable company was around $700 per machine. Liability only was very cheap. Content and replacement was the bulk of it.
I talked with a locating company that was based out of Tuscaloosa, AL. They seemed really sharp and good at what they do, however there was no competition for space here. Once word got out that I was looking for a place to put my kiosks, I had owners calling me. In my situation I did not need their assistance.
I am fairly new to the kiosk business, about 8 months into it. However, I have found that I have information that people thinking about entering the business need.
Are you already in the kiosk business?
You said that you narrowed your selection down to two kiosk companies but you never mentioned the other company. Have you heard of any of the following companies and if so, what do you think about them?
Moviebank
VendVision
QuckFlick
Thanks!
You are right. I did leave out that I called numerous companies while searching for a vendor. One of the companies would not sell to me because I was a novice, one company just wanted to lease me the machine, another had a horrible maintenance record, and one was just not affordable.
Thanks for bringing that up. I think much, much faster than I type allowing an opportunity to skip important information.
I will look over my research notes and see if I kept anything on those companies. MovieBank and VendVision do sound familiar but I am not real sure about QuickFlick.
I did look at their (QuickFlick) website and they use a kiosk that is very similar to mine. Did not see where they sell machines though. Maybe I was not on their site long enough to find them.
Shawn,
The insurance of $700 you are talking about – is it per year per machine?
I am still in the evaluation phase of whether this business is worth the time or not. Buying a machine is not a big deal. However the key is finding a location which meets your goal. Again, we might go wrong on the location too – the location which we think is a busy one and has the potential of a lot of rentals might not work out at all. There is hardly any one in our city and neighbors who ventured into this business to talk about their experiences of locations.
I read a lot of posts on the internet and also people who are selling their machines not able to make any profit out of it. Everybody is struggling just to break even.
My target is to make a net profit of $1000 on each machine. If a machine cannot make that kind of machine atleast eventually, then I feel it is too much of a hassle to handle.
Shawn, you said if you were to do it all over again, your answer would be “no”. Could you shed some light on it so that it would help the new people like me. Of course, I will not solely base my decision on it. But if Ihear majority of stories who are hardly cutting it to cover the costs, then definitely i have to seriously give it a second thought of pursuing the business any further.
Thanks again for all your help.
Here are the calculations I made:
Being very optimistic and estimating I would have 20 rentals a day at 1.99 a day.
Rentals Income – 20X$1.99X30 days – 1200
Expenses:
DVDs cost – $550 to $600 (i have taken into account the income on sales of DVDs – $5 each. So on an average a new DVD would cost $18 minus $5 for sale, a purchase of atleast 10 DVDs every week at a net cost of $13)
Machinery Insurance – $100
Software support from Manufacturer – $100
10% Revenue share to stores – $100
Gas to buy and refill DVDs per month – $100
Other Misc exp like Credit card merchant
account, RFID tags, DVD cases (if company other than DVDnow) etc – $100
If I try to be a miser on all expenses, I might be able to save $200 to $300 a month – on the assumption that I will do 20 rentals a month.
This net profit does not include the compensation for my time for the research, buying DVDs, filling them up etc. So I do not see a scope of making reasonable profits in this business unless I charge $2.99 or higher for rental or have large volumes of rentals (anywhere 40 to 50 a day).
I am not depending on the revenues generated from Ads as it is a very uncertain revenue. If we make it, it can be taken as a bonus. As this is a new concept, I am not sure how far vendors will be willing to sign up. If they don’t sign up and we base our decision on the ad revenues, then we are screwed.
So Shawn, are my numbers somewhere closer to reality as you are in the business right now. Or am I missing out any possible scope of making more money every month. Please share your views.
Yes, the 700 is per machine per year. It would only be around 200 or so with liability only. I am really considering it next year.
You are right, location is the key and there is absolutely no way of knowing until your kiosk has been on-site for three or four months if it is going to pan out. $ 1000 a machine is not too much to ask. It does not equate to more than 17 ~ 25 movies a night, depending on what you charge and your expenses.
Two reasons I would not do it again. 1) it is a lot of work each week for very little profit (to this point). Although I really believe the revenue will continue to increase staying on top of ordering new movies, pulling the old ones, dealing with customers that rent scratched DVDs, marketing, and preparing new movies before placing them in the machines is a chore that I am not being compensated much for. The second reason is a personal conviction. I guess you could say I lived under a rock but I had no idea that some of the block buster movies out on DVD today had such filth in them. I do not order the really hard core stuff and hate putting movies in there that I would not watch. This would not be a problem if all the movies were like National Treasure and Indiana Jones. Unfortunately they are not.
Don’t get me wrong, I don’t regret my decision to buy the machines. They are steady increasing in traffic and we are filtering the movies we purchase much better. Still a lot of trouble for little profit to this point.
Good luck with your decision and let me know if I can help.
You have really done your homework. You had me scratching my head for a minute until I noticed you are counting on everyone bringing the movie back after one night. My average rental is 1.78 nights. This should look better.
Rentals Income – 20X($1.99 x 1.78) X30 days – 2125
I have seen where people are getting 2.5 and up rental nights per customer.
Iam also starting in the dvd vending business and hoping to start in San Antonio, Texas. There over a millon people. but one of our large stores and Walmart are renting their dvds for a dollar a night. Do you think I would have a problem charging 1.99 first night then 1.oo each other night. Thank you LE
Louis,
I am really not sure. Neither our Walmart or McDonald’s have Redbox. I do not have to contend with that competition yet.
I would think with such a large population in your area a dozen or so Redbox machines that hold 250 ~ 350 movies each will not kill you. It all comes down to how many movies YOU can rent a night. Unfortunately you will not know unless you try. At that point if you are wrong it was costly !
I have another post coming out tomorrow that has ALL my Kiosk Financial Information. I am going into a little more detail and breaking everything out.
Love the post. I too own several kiosks and have experienced some success with some of my machines. We do seminars to help with current owners to help streamline your business. We also help with locations(and we don’t rip you off like the current competition). Feel free to email me above for more information.
Hey Shawn,
How many hours per week or month, whichever is easier for you to figure, do you spend managing your two kiosks? Thank you so much for your information! My wife and I are thinking about getting involved with this.
Thanks, -Mark
Mark,
If nothing is out of the ordinary during the week I spend about 2 ~ 3 hours prepping the dvds with stickers/rfid tags, printing artwork and upcoming lists, accounting, phone calls, ordering new movies, and travel.
Shawn,
I’m so glad I found this post. It’s so hard to find info on this business, especially on the specifics you talked about. For a quick intro I live in Vacaville, Ca in between Sacramento and San Francisco and about 45 min from both. The reason I said this is that 2 to 2 1/2 yrs ago, I started looking into this business almost in the exact manner you did and there was even less info out there. 2 1/2 yrs ago there were no kiosks at all in northern california, now they’re all over the place. The biggest players being Redbox in Walmart and Raley’s. and DVD Play in Safeways. Despite this, I still believe there’s a lot of opportunities out there for entrepeneurs. Now to my own questions about location, what do you think about a manufacturing facility with 1300+ workers and it runs 24/7 with three shifts. They have three of them in my town, actually 2 pharmaceutical companies and one big Kaiser hospital. I figure that they might not have the same traffic as a walmart but most of the workers are there 5 times a week and whats more convenient than someones work. I figure that if I get between 100-200 loyal renters a month (2+ rentals/week=8rentals/month) I should be doing okay. There’s also the occasional renters and dvd sales. I also have a question of your merchant account provider. I’m shopping for one right now and those transaction fees out there are ridiculous. 0.20 – 0.30 cents per transaction If I rent dvd’s at $1.00 – $1.50 that’s a significant portion of my income. Also, If the customer slides his card on the machine and you get charged a transaction fee, do you also get charged a trans. fee for an extra day even though he didn’t swipe his card for that extra day? Is insurance really necessary? Sorry for being wordy, but it’s great to finally be able to communicate with poeple about this business. Any comments from anyone is greatly appreciated.
Fernado,
First let me apologize for I think I deleted your second comment and most recent comment by mistake.
I have heard of people having success setting kiosks up in manufacturing areas. Location would be key however. Your kiosk would have to be in a very visible place.
I am with YourPay which uses a LinkPoint connection. While it is a substantial expense it is one I have to accept. There are a few companies that charge more on a micro price point level but from what I have found reliability and fees will more than offset the savings.
The way my kiosk works is when the customer swipes his/her card they don’t get charged right away. It only authorizes the charge. Once they bring the movie back I charge the card. That way I am only charged 1 transaction fee.
I wish you the best of luck. Let me know if I can help.
Shawn,
Who is your wholesale distrubutor? I’ve heard some people just go to walmart or target and get them on sale when they come out? They would then have to buy the dvds and load the machines all in the same day.
I’ve seen some other businesses that are from dvd now and they have a website where you can find the machine’s location and also check the availability of movies. Do you think that would increase sales also? Is this service offered through dvd now and do yu have to pay extra? I’ve found that moviemate makes the machine that dvd now has, wouldn’t they offer the machine at a lower price since they are the makers?
Fernando,
I use VPD for no particular reason other than they get me the movies I order on the Friday before the Tuesday release. After you pay shipping they are a little more expensive than WalMart but when you factor in the guaranteed buy back you do come out ahead.
DVDNow does offer me a back-end website for both me and my customers. I do not use it yet because a few features are lacking. I will elaborate more on that in an upcoming post.
I do not remember calling movie mate during my search for a DVD Kiosk and cannot find any remarks in my notes about them. Looking at their website they do say they are a leading manufacture of automated DVD Rental Machines. When you look at DVDNow’s site they say, “DVDNow Kiosks, Inc. has developed the finest automated DVD rental terminal available today.” All I do know is they both get their machines from a factory in China.
Im looking into investing in the dvd kiosk industry. Im trying to find out how much people are paying store owners for leasing the space. i know some people pay a flat rate and others share profits and am just trying to determine what a typical agreement is.
John,
I, like you have heard of kiosk owners being very creative. I have actually heard of an owner not paying the store owner anything for space. The store owner is seeing a big draw of customers from the kiosk.
I am not so fortunate. Without revealing the details of my contract (which I feel it would hurt future negotiations with store owners if exposed) I pay between 8 ~ 12 percent off the top.
Hi Shawn
i am also planning to start this DVD rental business in Dubai.I was doing a research since 1 year and found i cannot make a profit with 1 or 2 machines.
Since the dollar -Dirhams price conversion rate, i have to pay an AED 65000 for 1 Kiosk it would definitely is not a good choice.
But as you mentioned , moviemate and DVDnow is buying machines from china manufacturer , can you give me any details of them?
So i can directly contact them and buy the machine so it would be cheap…i hope so. i tried google -ing to search the DVD kiosk manufacturer in china but no luck…
If you find any please post the detail.
Your advice as a business owner will be an advantage..keep posting
Hello Shawn
thanks for sharing you experience with us , If you can give us your openion on what dvd capacity should you start with a new location. and what selection would you start with besides the new release ever y week. I was reading the article about redbox has updated all there kiosks to hold more than 500 dvds.
now blockbuster is coming with over 1000
dvd capacity in the market with multiple users
movies on demand, blue rays etc. do you think
this will help or hurt small operators like us.
Hi,
I’m considering getting into this business. What credit card companies allow for a low transaction fee? I don’t see paying .19 per thansaction, as they are pretty small.
Who do you use?
Thanks
Fabri
Hi Shawn,
I just want to ask about the Machine vendors. Which company would you say I should avoid and which is to be used?
Thanks!
I can only speak for sure about one company. That is DVDNow. If you read my bog you will see they are a really good company to work with. Sure they are a tad high on the front end but they support their machines like no one else I found.
I am with YourPay. I forget what the percentage that I pay … I just increased the nightly rental amount to cover the fee. No one complained and sales increased.
There were many times I felt like 112 was just not enough dvds … and I was in a slow market. I can imagine what the people in Chicago who are renting 20 to 30 each week night feel.
Good news, DVDNow has a new machine that holds much much more. Not real sure about the price tag however.
Shawn,
I would like to know how you can rent 7 rentals a night and make money. I guess you purchased the machine for cash. But if you use a $20,000 asking price and .99 rental even making 1.50 a rental after people do not return the rentals the next day, how can you even break even. It would cost about $540 a month to keep the machine stocked with new rentals. I figued 6 new movies a week at $20.00 a rental. You can get a buy back option from VPD at 5.50 a rental. So you can subtract $132.00 from the $540.00 and end up around $300.00 a month for rentals. Since you are only making $315.00 a month off of rentals this would not make money. This does not include insurance. So really you would be loosing money. I would like to do the business, but it seems like to me if you want to make your money back in 3 years. It would take renting 30 movies a day at 1.00 a rental.
at 30 a day and 1.50 rental= 1,350 a month
minus -600 a month to pay back 20,000 in three years.
-60 a month for insurance
-300 a month for movie rentals
-100 a month commision
-100 a month fee for technical support
-126 a month for taxes
$64.00 profit a month.
After you pay the cost of the machine back over three years you would have $664.00 a month which would not be bad.
IF you could tell me how you can break even on 7 rentals a day I would appreicate it.
Like I said I like the business but I think I am shooting to high to expect 30 rentals a day.
Ross,
At 99 cents a day there is no way to turn a profit on the volume I saw. I was fortunate and had no redbox competition, so I charged 1.99 a day. This was still a buck cheaper than the mom and pop shops and my average rental length was more than one day. Please see this post and I think it will answer some of your questions. http://www.realwebtoday.com/2008/06/dvd-kiosks-financial-considerations/ If it is not possible to average 15 to 20 rentals a day then I would consider something else.
Hi Shawn,
I loved your stories because I was on the other end , meaning I was selling the DVD kiosks. When I first read about this technology probably around 2003, for me it screamed of potential. It was like WOW, this will be the next wave for DVD rentals. I wanted to get in the business but when I found out the price of kiosks, that put a damper on things in regards to owning a bunch of them. The other thing in my community, the ideal location was a grocery store that told me I couldn’t put anything but G rated movies in them.
Any way to make what could be a long story shorter I still loved the technology and wanted to get involved in the business. My background was sales so I went to work part time with a very good kiosk vendor. I was dreaming of selling 100’s of kiosks per month and after a few years retire to the beach for life. It didn’t work out that way. A lot of excitement from interested people but very few sales of kiosks. I was very honest with people and painted a realistic picture of costs, amount of time, etc. Its not an easy business to run or make money in. I don’t know how even redbox does it. Anyway I went to work for another company in an entirely different field but I still dream and say to myself boy, why couldn’t I have gone to work for Redbox, I might be on the beach now.
Gary,
Maybe someday you will be kicking up your heels on the sandy beaches. Take care.
Shawn, I want to thank you on your series of DVD Kiosk articles. They were very helpful due to the non exisitance of articles on the subject. We have already been approved by DVDNow , and are excited to be at the beginning of this next generation of the DVD industry. Thank you for your insight of the subject. Take Care
Paul,
You are very welcome and are correct to say there is not a lot about the subject. Please keep us updated on your venture.
Hi Shawn. Wow, thanks for the awesome info. As a prospective kiosk buyer, I can say this is truly a gem of an article to stumble across. Any updates on how things have been developing over the last few months? Have you hit the desired 20+ daily average? I’m on the fence as far as moving forward with this so any more info you feel might be helpful would be greatly appreciated. Thanks again for all of the great info on your experience with this.
Best regards,
John
I sold out four months ago. There is a post in this blog that gives the details about why I sold out, however the numbers were improving. Location is everything with these kiosks.
Hi Shawn,
I want to thankyou for your insight.
My question is traffic. I have a Christan couple that own a 7-11 store and it is a busy one.I talked to them about putting a kiosk in (first one for me). They claim that they have 1200 to 1500 foot traffic per day. I this more traffic than you were getting? If you don’t mind saying how much traffic were you getting?
Blessings on you & your family
Steve
Hey Shawn
interesting blog! I am a college student interested in the kiosk business. How much was your start-up costs?
Thanks for reading and I wish you the best of luck.
It really isn’t. The foot traffic was very good at the machine. I think the issue was more lack of credit cards and fear of the unknown.
Kelly,
Thanks for reading and let me tell you, the future does look good for these machines. My start up cost was around $ 37,000. Good luck !
Shawn,
Very interesting info. I am currently look at DVDnow kiosks. I was projecting a low(worst) case scenario of 20-30 rentals a night. A few questions-
how hard was it to secure locations? right now redbox and moviecube (at kroger stores). There are numerous locations, but are the owner/managers that receptive to having a kiosk?
how many kiosks did you own? Would DVDNow do a lease/buyout program?
Do you have any references of operators making very good profits from this business?
Will probably have more questions later. Thx. todd
Hey Todd … Securing the locations in North Alabama were no problem. I had my pick of convenience stores, smaller grocery stores, and non-chain drug stores. I had no problems selling the owners on the obvious benefit to them. I owned 2 machines and I think once you are with DVDNow for so long (maybe 2 years) they will sell you machines on 24 or 36 month terms.
I never spoke directly with anyone making what I would call great money. What I would call great money is $30,000 per box. I have talked with some making $15,000 to $20,000 a box though.
Shawn,
I was wondering who was it that offered you a leasing option on the kiosks? Id like to look at the benefits of buying/leasing.
Thanks
I’m shocked at these low rental numbers you guys are talking about. I live outside of Hartford CT in Manchester, a midsize town of about 60,000 people. There are two StopnShops within 15 min of each other here with Redboxes, and every single time we are at the stores, there are people using these machines. Often on a Friday or Saturday, there will be a line of 4 or 5 people deep waiting to use the machine. I understand not everyone is there to buy a movie, some are returning them, and some are just browsing, but there is almost non-stop activity.
They got installed about a year ago, one at each store, and one added an extra machine within about six months. I have no reliable idea as to what amount of income they are generating, but these machines are in constant use. I would be shocked if they do less than 20 rentals on a weekday and less than 50 on Friday and Saturday.
After NCR bought out TNR/Moviecube, Dynapace made the decision to start targeting the owner/operator market. 300 capacity machines are 8500 and can be configured for student id cards etc. DVDnow will do that for about 15,000/machine. I will keep you guys updated.
After NCR bought out TNR/Moviecube, Dynapace made the decision to start targeting the owner/operator market. 300 capacity machines are 8500 and can be configured for student id cards etc. DVDnow will do that for about 15,000/machine. I will keep you guys updated on additional info
Hey, this is my first visit to your blog… We are a group of volunteers and starting a new initiative in a community in the same niche. Your blog provided us valuable information to work on. good job
Heya i got to your site by mistake when i was searching bing for something off topic here but i do have say your site is really helpful, like the theme and the content on here…so thanks for me procrastinating from my previous task, lol
Thank you for your open hlp here, If some one else is dealing yet with DVD rental Biz, and have a forum, blog or similar, please share also valuable and pehaps not personalized facts, anonimus cashflows and success cases, etc will be more than wellcome, because there is a concerning lack of data and facts about this apealing business.
Best
Jay,
I can provide you with some info regarding our success. We started slowly with 2 machines and now have 14. We will be expanding this year to 42. We make b/t 250-500 (net) per kiosk. Our first 2 machines were used , and we have since converted over to a new kiosk manufacturer with higher capacity and an $8200 price tag (I can buy 3 kiosks for the price of 1 kiosk). The secret is #1 location #2 location #3outstanding customer service. We are mostly on college campuses and independent grocery stores, but we are venturing out to new venues.
Hi Bryan, I’ve been researching DVD kiosk vendors/manufacturers. I’ve looked into DVDNow but the upfront costs are pretty steep. Could you share the name of your kiosk manufacturer? One more quick question. The $250-$500 (net) per kiosk that you referenced in your post; Is this per month, year?
Teri,
I am using a kiosk like that shown on our website http://www.diverseintellectual.com. The net listed is per month. In the beginning, we really struggled…things turned around with persistence. There are other good kiosk companies out there like us that offer a more competitive price.