Blockbuster is piloting a new movie-rental program that allows customers to load movies onto SD cards and play them back on mobile phones and TVs equipped with SD readers. The rentals cost $1.99.

Perhaps conceived as a one-up response to the unexpectedly popular RedBox movie kiosks, the SD-card rental stations are meant to address some of the age-old problems with DVD rentals–namely that they’re easily damaged, and must be returned. With an SD rental, the user keeps the SD card, though the content contains DRM which sets a date of expiration. (Above, the taxonomy of SD cards; below, a Blockbuster SD kiosk.)

The SD rentals are also meant to target online streaming, which is growing in popularity thanks largely to Netflix’s Watch Instantly feature. Blockbuster is hoping that the better quality video contained on their SD cards will win streaming video customers back, but of course, you still have the inconvenience of traveling to a Blockbuster SD kiosk. Blockbuster also offers “on demand” viewing via its Web site, letting you download DRM’d movie rentals as opposed to streaming them. Still, renting even the crappiest of movies will cost you nearly the same as a whole month of movies on Netflix; this downloadable copy of Cranked High Voltage is $4.

Other obstacles remain. Many phones use micro or mini SD cardslots, and don’t take full-sized SD cards. Many TVs still aren’t built to play video of SD media, and most laptops don’t have them either, meaning that watching an SD video on the road means taking a long a USB card reader. Another problem: not everyone will enjoy the irony of driving somewhere to pick up a data-card the size of a postage stamp. Still, SD cards do represent a marked improvement over DVDs in durability and re-usability, so if they caught on it’d hardly be a step backwards for movie buffs.