Blockbuster finally hits back at kiosk firm Redbox with boxes of its own

Blockbuster (BBI) has been bested in the online video rental business by NetFlix (NFLX) and in the online video-on-demand business by a number of other companies. The bricks-and-mortar video store firm's shares have fallen from over $10 five years ago to $0.63 as trading opened today. But it's finally making a move to challenge the threat posed by video kiosk company Redbox.

Redbox operates over 17,000 film rental kiosks across the U.S. and rents most movies for $1 a day. Blockbuster has 7,100 stores around the world, but it has been cutting that number each quarter. Redbox isn't nearly as big as Blockbuster, but it is growing; third quarter revenue rose 90% to $198 million.

The Redbox model has one very significant advantage over Blockbuster, which is that kiosks are cheap. They do not require staff or the cost of renting store space. So Blockbuster has decided to launch its own kiosks. The Wall Street Journal reports that cash machine company NCR (NCR) will open 200 Blockbuster-branded kiosks in New York City, where Redbox only has three locations.

Critics will surely criticize the NCR/Blockbuster plan, saying that it is too little, too late, but In the case of the kiosk launch, that may not be true. Blockbuster is a much more widely recognized brand than Redbox, and that may make some customers a bit more comfortable with the concept of renting a DVD from a machine.

Blockbuster has run out of options. It cannot catch up with NetFlix in online DVD rentals. It is unlikely to outmaneuver the cable companies offering video on demand, nor the firms that have cut deals with Hollywood to stream movies over the internet. But if Blockbuster can get several thousand kiosks into the market in the next year, it may find it has a successful, albeit relatively small, new business.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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