(November 12, 2009) A new source of potential payment card transaction volume opened up this week when ATM and kiosk manufacturer NCR Corp. and software provider MOD Systems Inc. announced a pilot in which consumers can download digital movies and TV shows from kiosks.

Just as DVDs displaced VHS tapes for movie rentals, experts agree that digital downloads will replace the DVD, even though the blu-ray optical disc is giving the physical video medium a second wind. Digital downloads can provide better-quality playback, can be used in a variety of devices, and don’t need to be returned. “This is the future of entertainment kiosks,” Alex Camara, vice president and general manager of NCR Entertainment, said in a news release. “Consumers clearly demand the choice to play content where, when, and how they want.”

Duluth, Ga.-based NCR calls the pilot an “ambitious initiative to leverage breakthrough portable digital-storage technology.” The test sites are two Blockbuster Inc. stores and four of Movie Gallery Inc.’s Hollywood Video stores in Portland, Ore., Seattle, and Dallas. There is no end date for the trial, an NCR spokesperson tells Digital Transactions News. Seattle-based MOD Systems creates so-called media-on-demand systems for retailers that offer video, music, and related digital content.

A consumer at one of the test kiosks chooses from more than 1,000 new or older movies and television show titles. He then makes selections and downloads the video content onto a secure-digital (SD) memory card. The programs can then be played on a home TV. The initial technical pilot will facilitate playback on a TV via a digital media player provided to trial participants, NCR said. Future iterations will allow consumers to move digital content via the SD memory card to a number of portable electronic devices, such as laptop computers and mobile phones. Consumers can provide their own SD cards or buy them at Blockbuster, according to the spokesperson.

The kiosks accept major credit cards. They do not accept PIN-debit cards, but the NCR spokesperson says that functionality could be added if demand warrants. The kiosks obtain authorizations via a wired network. Wilmington, Del.-based Electronic Payment Exchange (EPX) is the payment processor.

NCR didn’t disclose pricing, but says rentals from the digital download kiosks will be tested at various prices. If NCR follows current DVD-rental pricing models, such the $1 per DVD charged by Coinstar Inc.’s hot Redbox subsidiary, a consumer could get 10 titles for $10. Such a small-ticket transaction would be a natural for a signature-based debit card, which is processed like a credit card. “It’s a great use of a debit card,” says Kate Monahan, a retail banking analyst with Aite Group LLC, Boston. “We may see an increase in debit [transactions].”

In a departure from existing rental services, consumers will have 30 days from purchase to watch the movie. Once they begin watching the movie, they have 48 hours to finish watching it before digital rights management (DRM) technology automatically locks the content to prevent further viewing, according to the release.

NCR has branched out from its core ATM business to become a major kiosk supplier in supermarkets and other venues. In the DVD-rental market, NCR works mostly in partnership with Blockbuster. Dallas -based Blockbuster, with its ubiquitous but expensive video-rental stores, is struggling to retool as rivals Redbox and Netflix Inc. eat into its market share. As noted, Redbox offers new releases for $1 a night through its trademark red kiosks. Coinstar reported last week that its 20,600 Redbox machines performed almost $200 million worth of transactions in the third quarter. Netflix has captured a lucrative niche by taking orders over the Web and sending movies to customers in the mail. Last year, NCR said it would partner with Blockbuster to deploy 10,000 DVD-rental kiosks in 2010. The kiosks are branded Blockbuster Express.

In April, NCR bought the remaining 80.4% of movie-rental kiosk operator TNR Holdings Corp., No. 2 behind Redbox, that it didn’t already own. Most of TNR’s machines are in Albertson’s, Ralph’s, and Kroger supermarkets. TNR has developed the software in its kiosks.

NCR says its existing DVD kiosks, including its new outdoor kiosks, are “digital- download ready” and capable of integrating the new technology. NCR owns the kiosks in the new pilot and won’t disclose pricing for the machines.