MOD Systems plans SD card kiosk test

DIGITAL: Company in talks with retailers to have machines in stores in second half of year

By Jennifer Netherby -- Video Business, 5/6/2009

MAY 6 | DIGITAL: SANTA MONICA, Calif.—Digital kiosk company MOD Systems is negotiating with three retailers to launch pilot tests of its machines in stores in the second half of the year, executives told Video Business at the Digital Hollywood conference here Tuesday.

MOD joined with Toshiba and NCR Corp. last year to rollout the kiosks, which allow consumers to download movies to SD memory cards, the same cards used to store photos on digital cameras. SD cards are already playable on a number of devices, and Toshiba has announced it plans to make its TVs, DVD and portable players and other devices compatible with SD cards so consumers will be able to plug in the cards and watch stored movies.

MOD CEO Anthony Bay and senior VP of business development Brad Gleeson wouldn’t say which retailers they are talking to, but they said they’re already in the video space.

Gleeson said MOD is polishing up its system before committing to a pilot launch this year, though acknowledged they will have to do so months before the holiday season when retailers are unwilling to bring in untested products that waste valuable floor space.

Last year, MOD and other kiosk companies had to delay plans for a pilot launch because they couldn’t get deals done to roll out the systems to kiosks early enough in the second half of the year.

MOD plans to sell new releases and catalog films from Warner Bros. and Paramount Pictures as a rental or permanent download. Bay said other studios are interested, but MOD hasn’t signed additional deals because they would have to pay upfront for the content they expect to sell as a download, something they don’t want to do until they know when the kiosks will go into stores.

Bay said it’s not critical to launch the kiosks with content from every major studio and pointed to Apple iTunes, which launched video downloads with content from just Walt Disney Studios. He said having major new releases is more important than breadth of content.

Earlier this week, MOD announced that it had started a subsidiary in Japan to launch kiosks in the Japanese market. MOD Systems Japan is wholly owned by MOD and will be headed by Tetsuya Kato, who previously served as president of Toshiba Entertainment.

Even as MOD launches into retail, the startup is facing two separate, high-profile lawsuits. Former Warner Home Video president Warren Lieberfarb is suing the company claiming it owes him money for consulting work. In a separate suit, angel investor Robert Arnold filed suit against the company alleging massive fraud and embezzlement by former CEO and founder Mark Phillips.

Bay wouldn’t comment on the litigation beyond saying “the company is sound” and that Phillips is no longer CEO or chairman. Bay, who was named interim CEO last month, is now CEO. He wouldn’t say whether Phillips has been fired. MOD placed Phillips and chief operating officer Kenneth Gordon on administrative leave in April after launching an internal investigation into the fraud charges. The company has never said what the committee found.