DVD Kiosks Soon at Wal-Mart? Threat to Netflix and the Knockout Blow to Blockbuster and Movie Gallery? (WMT, BBY, TGT, MOVI, NFLX)


Wal-Mart (ticker: WMT) has been actively testing in its stores 'music kiosks' -- booths that burn music to CD on customer's demand. Now Wal-Mart, the world's largest seller of DVDs, is considering DVD kiosks that would burn movies on demand, to alleviate a shelf-space problem and possibly spur lagging DVD sales.

The movie studios have also approached Best Buy (ticker: BBY) and Target (ticker: TGT) with the idea. An article in the Financial Times provided some details -- excerpts:

"We're exploring all different types of distribution mechanisms to the customer," said David Porter, a vice-president at Wal-Mart, the world's largest seller of DVDs. "There have been discussions with most of the studios."...

the discussions reflect the entertainment industry's new focus on using digital technology to make their products available to consumers on a variety of platforms, from mobile phones and MP3 players to video-on-demand services offered by cable and satellite TV operators...

The talks come at a crucial time for Hollywood. DVD sales generate more money for the studios than box office, yet after growing at double-digit rates for the past few years, some analysts have predicted that DVD sales could be flat or decline by 2007.

Quick comment: Can't be good news for Netflix (ticker: NFLX), as this solution neutralizes two Netflix competitive advantages: potentially wide selection of movies and no late fees. Arguably, with Netflix the top performing Internet stock year to date, this isn't priced-in to Netflix' stock.