This comes from a statement made by NCR CEO Bill Nuti who told Bloomberg News the kiosk manufacturer was willing to spend millions to acquire third-party digital and by-mail rental properties.

It is well understood that Blockbuster needs to expand out its distribution network in various ways besides their stores such as Kiosks, DVD-By-Mail, and Digital Distribution in order to remain viable. But current financial state precludes their ability properly fund those ventures. As such, they have joined forces with folks like NCR who currently licenses the Blockbuster name for use on its Blockbuster Express DVD Kiosks because of the value of the Blockbuster Brand.

As Blockbuster reported its non-Blockbuster earnings report yesterday, it might open the door for NCR to acquire a business unit, distribution channel, or interest into Blockbuster itself. Gil Lauria, analyst with Wedbush Morgan Securities in Los Angeles says, “NCR at some point may decide to buy any piece of Blockbuster, depending on what happens to the company financially.”

It is understandable that NCR may be worried that if Blockbuster goes down, the value of that name also goes with it. As such, they are looking at ways that they might be able to both gain another distribution channel as well as bolster that reputation. Those goals might require them to purchase more assets from Blockbuster. As Lauria put it, “NCR is worried about its own business, and they are ready for any [third-party] scenario Blockbuster might entertain. If Blockbuster was to get in [further] trouble, NCR would be able to take some of those pieces.”

DVDPlay was the first to market with a DVD rental kiosk back in 1999. Their kiosks were initially used by McDonalds to roll out Redbox. Shortly thereafter, Redbox created their own design and began to have those manufactured by another provider. In October of 2008, DVDPlay received a patent for their kiosk design and promptly sued Redbox for patent infringement claiming that Redbox had infringed on that patent. Redbox immediately countersued saying that DVDPlay was infringing on one of their patents. Both cases were dropped in late February 2009.

DVDPlay currently has 1,300 kiosks deployed across California, Colorado, Illinois, and Texas. Though Blockbuster Express expected to have significantly more kiosks by the end of 2009, this does leave them at 3,800 kiosks owned and operated under the two brand identities.

See the full press release from NCR.

As Blockbuster closes stores rapidly, they are actually turning their efforts back to their kiosks to keep the company alive. Primarily the DVD kiosks are finding themselves in places where people frequent on a regular basis other than a video rental store; grocery stores, convenience stores, dollar stores (which are seeing a huge climb this year due to the economic situation), and even fast food restaurants. People have to make a specific trip to go to a Blockbuster location both for rental and return. It is very common for there to be a Blockbuster Express kiosk in a store within the same complex where a brick-and-mortar store is. It seems like 30% of all the Publix stores out there where kiosks are have a Blockbuster in the same parking lot!

But if you are like me, if I did walk into a Blockbuster store I’d just as soon deal with a kiosk there than deal with the people working there. But from a company perspective, there is no reason to use a kiosk inside a brick-and-mortar store. You have significant expenses in that brick-and-mortar store. But that all just changed.

Now we have the pilot program of the downloadable content kiosks. Because these require a little more than you can do at a simple kiosk, namely checkout of a hardware device, they are being placed in the Blockbuster locations. Right now, when you download content, it cannot be played back with many devices (as far as anyone knows, only one device at the moment). So the stores are providing a device that goes along with your downloadable content that you can hook up to your TV and watch. We can presume that there will be some way to move the content later so that it can be played on the devices that people actually have. For myself, that would be an iPhone, AppleTV, or the Roku player.

So I wonder if DVD rental will also be something you can do at the kiosk and how that will affect the store sales. Leave me your thoughts and comments.

No details have been given yet about what devices the video can be played back on. Samsung and others have announced or released TV sets that have SD card slots which presumably would play the content. Several Inside BlockBuster Express members have emailed or posted wondering whether the content will play on their portable devices. At this point, I haven’t had anyone run into one of these kiosks to determine that answer. If you know of one and can test, please let us know!

The announcement says that the pilot test machines operated by NCR in conjunction with MOD Systems are located in select Blockbuster locations and other retail stores.

NCR has said before that it strongly believes in the digital download model. Its existing Blockbuster Express kiosks are “digital download ready” and NCR plans to rapidly expand use of the technology through its existing kiosk base.

Rentals from the digital download kiosks will be tested at various prices. Similar to rental practices on Cable Pay-per-View and iTunes rentals, consumers will have 30 days from purchase to watch the movie. Once they begin viewing it, they have 48 hours to finish watching it before digital rights management technology automatically locks the content to prevent further viewing.

He sat down with Danny King over at Video Business for an interview. You can find the full text at Video Business Online.

In the interview he tries to distinguish how Blockbuster Express is and will be different from Redbox. By having double the capacity and by working on a future with digital downloads they hope to differentiate themselves.

He also states his understanding that consumers expect them to provide new release movies on the release date but that they must work hand-in-hand with the studios to make that happen. He believes that the DVD Kiosk marketplace has not stolen from the home entertainment pie but has, in fact, grown it.

Check out the full interview at Video Business.

It has not been announced when the service will be available or on what devices it will be supported. But Blockbuster senior vice president of digital entertainment Kevin Lewis said, “The integration of our OnDemand service into Motorola’s mobile phones will provide access to thousands of movies from the moment someone initiates their service.”

Blockbuster’s OnDemand service, which charges rental fees of up to $3 per movie download or sells movies from $9.99 to $20, gives users on-screen search and browsing capabilities and additional content such as ratings and trailers. This is very similar to what Apple’s iTunes store does for users of the iPhone. Blockbuster’s senior vice president of digital entertainment Kevin Lewis also stated, “People are increasingly relying on their mobile phones to stay connected to the things they love the most, including their favorite movies and TV shows.”

Other details released say that the upcoming application will also be able to choose films for home delivery or reserve titles for in-store pickup. At the moment it doesn’t say anything to link it to Blockbuster Express kiosks.

Motorola is desperately trying to regain handset market share. Once the top dog in the market, it has lost that appeal to Apple and others who are designing more smartphones and mobile computer handsets. Motorola has also signed on to deliver Android phones. Perhaps the Blockbuster app is a part of that strategy.

But with the iPhone, its YouTube browser, and the iTunes and App stores so firmly entrenched, they will have a huge uphill battle. It would be easier for Blockbuster to enable an App on the iPhone which has the market share than to exclusively try to provide this service on Motorola handsets. And with the rumor that Netflix is polishing up its streaming player app for the iPhone for release, they better get cracking!

Keyes blames the closings more on cash flow than on increasing sales. With huge payments due quickly and looming overhead, they need to build cash flow more than they need sales.

Read the full article at Bloomberg.com.

Universal ordered wholesalers Ingram and VPD to stop supplying its titles to Redbox within 45 days of release. Redbox sued Universal in October and Universal countersued. A decision is expected any day from a federal judge in Wilmington, Del.

Sony recently struck such a deal with Coinstar’s Redbox, becoming the first studio to agree to supply Redbox with product directly. In exchange, Sony secured a Redbox pledge to keep the studio’s used DVDs off the resale market.

A Fox insider noted that execs are braced for a lawsuit in response to the decision to withhold that studio’s titles from dollar-rental chains.

A carefully worded statement was issued late Wednesday by Fox. “We invest enormous money, creativity and effort to make entertaining, high-quality Fox movies available throughout the world,” the studio said. “In the home entertainment business, Fox offers our movies through bricks-and-mortar retail outlets and online retailers, including both national and regional chains and small mom-and-pop stores, offering consumers a wide selection of new releases and catalog for both rental and purchase. … Our desire is to maintain for Fox movies a thriving network of distribution serving all types of consumer preferences, on reasonable business terms for Fox as well as our distribution partners.”

A Fox spokesman declined to elaborate on the statement.

Speculation has sent both stocks up about 5% so far. Neither company would comment on any discussions that might be going on. Watch this space to see what might happen next!

So the question is – When we will see video games start being rented from the kiosks? Redbox has done some experimenting with it but there has not been any widespread deployment at this point. E-Play has deployed kiosks in several Wal-Marts and Best Buy stores in a pilot that not only rents and sells games but also can purchase them back for credit. With NCR at the helm for Blockbuster Express, it looks like they could be the leader in video game kiosks. But Blockbuster Express is just starting to deploy kiosks and at this point they need to get their feet wet in the DVD marketplace to begin with.

“We believe there is still a significant opportunity in the DVD-rental space,” said NCR spokesperson Jeff Dudash. A possible video game option in the future is “something that we’re examining, but at the moment we are focusing on delivering the DVD experience,” he said.

NCR also is a partial owner of E-Play. The E-Play kiosk holds significantly more discs than the Kiosks used by Blockbuster Express and Redbox. This combined with their ability to accept trade-ins for credit has them leading the pack in Video Game rental and sales. In addition, NCR is also working with Toshiba and MOD Systems, which just recently made a DRM-free deal with Sony Music and several other major record labels, to develop kiosks with digital music download capabilities.

Now if NCR can just combine these efforts together into a cohesive strategy, they might win the day not only in the DVD video space, but in the video game market as well. As Dudash said, “Certainly, there are a variety of things we’re looking at in the entertainment space.”