Here’s an idea: When your top rivals are renting dirt-cheap DVDs from ubiquitous kiosks, or streaming thousands of films as a free bonus to customers who rent mail-order rmovies, what do you do? If you’re Blockbuster, you start a trial run of kiosks that will allow consumers to rent DRM-protected videos on SD cards, and play them back using a proprietary box that will do nothing else. Yeah, that’ll show ’em.

The new service, Blockbuster Express Digital, will be tested in a few markets. The initial offering will have about 1,000 movies, which is about 15,000 fewer than Netflix offers on its streaming service, which works with TVs, computers and PS3s, and other devices.

Blockbuster isn’t the first company to try to to rent DRM-protected movies that play on proprietary devices. Apple’s been doing it for years through iTunes. Of course, to rent movies on iTunes, you don’t have to go hunt down a kiosk. You can download them to your computer, iPhone, iPod or Apple TV and watch them instantly. How’s Apple doing with that? CEO Steve Jobs calls Apple TV his “hobby,” and when the company released an upgraded version of the box last month, it didn’t exactly take the world by storm.

So, yeah, good luck with that Blockbuster. It’s nice to have a hobby.

NCR, MOD Systems begin digital kiosk download revolution in Entertainment with first technical trial in retail [Press Release]

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