Blockbuster Inc. is planning to close as many as 40% of its stores over the next two years as the company continues to struggle against new competitors.

The Dallas-based movie-rental company had previously planned to close 1,000 stores, but on Tuesday it raised that number to as many as 1,560 of its 3,750 retail outlets. Of those, up to 300 may be converted to outlets, and up to 300 are undergoing lease mitigation or termination efforts. It said the move would help boost profitability and save $26 million in working capital.

Blockbuster has come under increasing pressure in recent years as lower-cost rivals have entered the field. Netflix Inc. offers a monthly subscription plan for about $9 for an unlimited number of mail-order rentals and online streams. Redbox, a unit of Coinstar Inc., has vending machines which rent DVDs for as little as $1. Both companies operate with lower costs because they aren’t burdened with the heavy fees of leasing thousands of retail locations, as Blockbuster does.

read more at The Wall Street Journal

Karen Forman constantly needs something from the grocery store. Milk, bread or a movie.

Yes, a movie.

Renting movies has never been more convenient, cheap or ubiquitous.

Redbox, the $1 do-it-yourself rental machine the size of a refrigerator, offers DVD movie renters convenience at a place people visit all the time: the grocery store, among other places.

“It’s right there,” Forman said as she dropped off a movie at Harris Teeter in Mount Pleasant on her way home to downtown Charleston. “You don’t have to make another stop.”

“We are in locations where consumers are already shopping,” Redbox spokesman Chris Goodrich said. “We are saving customers that extra stop.”

A typical kiosk can earn quite a haul: about $50,000 annually in revenue per machine in operation after three years. “We have grown at a phenomenal pace over the last six years, and that growth is continuing even in the midst of a recession,” said Gregg Kaplan, who led Oakbrook Terrace, Ill.-based Redbox Automated Retail from its inception until April, when he became chief operating officer of its parent company, Bellevue, Wash.-based Coinstar Inc. “We’re not seeing anything that’s slowing it down.”

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While many Netflix (NFLX) watchers are worried that the movie rental company won’t be able to compete with other online streaming services or cable companies someday, Netflix CEO Reed Hastings says the company has a much more important competitor in the short-term — while disc-based rentals are the vast majority of its business.

In terms of competition, the rise of kiosk $1 new release rentals has been notable. In exit surveys of canceling Netflix subscribers, kiosk is more and more frequently named as where they will go now for movies. And by the end of the year kiosks will likely be our number one competitor as video stores fall inversely. There are already more kiosks in America than video stores. If kiosks companies are able to further refine their systems to be able to profitability support lower-traffic locations then over the next three years we may see a kiosk in every 7-Eleven, every Starbucks and every airline gate.

read more at Silicon Alley Insider