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Money PileThe ever-loquacious Mitch Lowe, CEO of Redbox, was recently interviewed by the Wall Street Journal. In the piece, Lowe defends his company and its business practices, saying that studios are placing undeserved blame on Redbox for their current predicament. Many of the arguments Lowe makes are ones we have heard before, but he also makes some bold and interesting claims. Here are some highlights:

Lowe on what Redbox has done right during the recession
“Several years before the recession started hitting we designed a product that has enormous value. Any time you find a product that cuts the cost by more than half, you’re in a very good position. When you compare what customers spend at Redbox versus Blockbuster and all the alternatives, we’re saving consumers $50 million to $60 million dollars every month. . . A good value is a good value when the economy is doing well or when it is doing poorly.”

Lowe on how much responsibility for the decline in DVD sell-through should be placed on Redbox
“[Studio executives say] 80% of the decline in DVD sales is due to the economy. That leaves the 20% which would be Redbox and all the other factors. If you are a standard-def DVD owner, not only is the economy affecting your purchasing, but you’re also concerned about Blu-ray, and (thinking) ‘Should I wait? Should I buy?’. . . Almost everybody I know has bought almost all the kind of classics and all the things they’ve always wanted to own. Then maybe on top of that you put Redbox. We believe that we are a very small portion of it. . . I just think this whole idea about the dollar price point is the studios looking for a scapegoat.”

Lowe on whether declining DVD revenue will result in studios producing lesser-quality films
“I think that’s a faulty argument. . . Every time an industry is faced with challenges, you should be looking for creative new markets to sell your product to, or expanding markets. . . What we’re doing—and I think some of the studios recognize this, some don’t—we’re expanding the ability for more people to watch more movies. This is really just a model change that they need to get on board with.”

Lowe on the probability of Redbox going digital
“If any of these new revenue streams work, we would add them to Redbox. . . We need to always make sure that what we deliver to the customer is unique and incredibly valuable. . . It is going be a big question, whether it’s integrated into the box [in the form of movies customers could download onto thumbdrives] or it’s delivered straight to your home [via the Internet]. Those are the kinds of things we need to test.”

Lowe on Redbox’s recent higher pricing tests in select markets
“We have probably 20, 30 tests going on around the country, trying to understand what’s really driving the consumer. We measure everything. We’re always being asked the question, ‘Why don’t you raise prices?’ I need to explain why we go down one path versus another. So far it’s too early to say just how much [business] is down. It is down [in those markets], but it’s hard to say how much.”

[via The Wall Street Journal]

27 Responses to “Redbox CEO: We Save Consumers $50-$60 Million Every Month”

  1. Visitor [Join Now]
    John Small [visitor]

    Sounds like Mitch doesn’t want to admit that they are making more money by charging more for their rentals.

    I suspect he wants to do a stealth roll out on the increased pricing so that not too many people complain at once.

    Get ready for it people. $2.00 for the first day is coming soon to a Redbox near you.

    • Visitor [Join Now]
      John [visitor]

      I think this has a lot less to do with what price Redbox thinks they can charge, and what price they think they have to charge to keep the studios happy.

      Studios hate to walk in and see that something they spent millions on is only worth $1 to a company. They have devalued product so much it is hurting the overall video industry. If Redbox can find a price that keeps the studios happy, then they think they won’t have to deal with the rental window from the 3 major studios which is hurting their business a lot more than they will admit.

  2. Visitor [Join Now]
    Robert [visitor]

    Redbox is definitely saving me money lately! 5 weeks of releases that don’t interest me enough to pay the $1.50 test market rental fee so I haven’t rented a single movie.

  3. Visitor [Join Now]
    rb [visitor]

    Well, I’m glad Mitch realizes that business is down in those test areas where they raised rental prices to $2. Keep prices at $1 and offer a weekly Monday promo code–I bet that’s when revenue was the highest for Redbox. Redbox already acknowledges that customers usually end up keeping a movie more than 1 day so my guess is Redbox made more money off the Monday weekly promo code because people forgot to return the promo code dvds and ended up paying for more rental days.

    • Member [Join Now]
      Mark [rb123456789]

      “Business is down” does not necessarily mean revenue is down. If business is down from 100 rentals a day to 80, 80*$2 is still 60% more money for them than 100*$1.

      The entire goal of the pricing tests is to see where the “sweet spot” is in their pricing. Basic economics theory says that as the price goes up unit sales will go down, the theoretical goal is to raise the price high enough that the remaining sales make more money in total than at any other price.

      • Visitor [Join Now]
        SeanDavid [visitor]

        Which contradicts what Lowe and redbox claim are their business interests. Of course, a business has to make money, and give the people that run it a living, no denying that. However, Lowes statements have always suggested that it’s about the consumers. Redbox wants to save people money. Give them entertainment at a great value. When we now reallize that, like any other (greedy) big business, it’s all about profit. Period. They don’t give a crap about us in any way, other than our wallets.

        Bad move redbox. You did very well up until this point. You made a lot of money. Then you got greedy. Just like the studios. Rest assured, if redbox raises the price at all, I will go back to blockbuster or netflix exclusively. I have done all the calculations, and as of now redbox saves me money per month on an estimated 16 rentals. If the price goes up to even just $1.50, this will no longer be the case. In fact it will be considerably more than a subsciption to blockbuster or netflix. So go ahead redbox, raise the price. I’m sure that’s exactly what your competition wants you to do.

        • Member [Join Now]
          Mark [rb123456789]

          Were you really so incredibly naive/stupid that you didn’t know Redbox exists to make themselves and their investors money, and will go out of business if they don’t? The idea that if a business isn’t non-profit it’s automatically greedy is ridiculous.

          This board quite logically has more movie afficionados / high volume renters than the general population, for them Netflix is and will continue to be a cheaper option for primary rentals. But not for the majority of people in this country, who don’t rent anywhere close to 16 a month.

          • Visitor [Join Now]
            SeanDavid [visitor]

            Yes, that’s exactly what I thought. I thought redbox was some kind of charity, there only to give us movies, not to make money. Or maybe I think that…”Of course, a business has to make money, and give the people that run it a living, no denying that.” …Which is what I said in my comment. And when a business gets big enough it happens every time: there concern about the opinions and experiences of their customers dwindles to almost none. Or at least, they are only concerned as far as if it will hurt profits. If there is some big company out there that still genuinely cares about each customers experience with their business I would like to know about it, so I can shop there instead of places that act like I’M causing them trouble for having the nerve to return something defective or complain about unsatisfactory work…

  4. Visitor [Join Now]
    jamie foxx [visitor]

    if i were redbox, i will give no more free codes, screw the cheapo, lol

  5. Member [Join Now]
    darthgummibear

    I’ve never once used a promo code. Seriously people, it’s only one dollar. Don’t make things harder for them then they already are.

    • Visitor [Join Now]
      John Small [visitor]

      And if it was $2.00 then it would only be $2.00. Which is a great deal for a couple of hours of entertainment.

    • Member [Join Now]
      mouthsmasher [mouthsmasher-2]

      Only a dollar per rental doesn’t seem like much, but if you calculate how many promo codes I’ve used since I started renting from Redbox, I’ve saved probably somewhere around $25+.

  6. Member [Join Now]
    ChadCronin [chadcronin]

    It never feels good to have something good and have it taken away. Now with the studios making it harder to get titles and with fewer decen titles being released and haters on this site always wanting us to pay more, it just takes all the fun out of things. I resort to reading this site more than actually watching movies. Thank You Redbox for saving me money! I agreew with rb. The free monday code was great. I got me to rent most of their movies and got me talking to my friends and familys about which movies to rent there and I was alot more aware of titles. Now with only a monthly code and lower selection I have started finding other things to do with my time. Raising the price is only gonna make this situation worse.

    • Visitor [Join Now]
      John Small [visitor]

      The studios do not care about you. You will not spend money which means you are not a consumer of their products.

      Cough up the bucks and then they will care again.

      • Visitor [Join Now]
        rb [visitor]

        So you acknowledge the studios do not care about the consumer UNLESS the consumer is blindly willing to pay more money for their product, thus satisfying the studios’ never-ending monetary greed! Okay, so if you now acknowledge BOTH Redbox AND the studios are greedy, I’m choosing to support the consumer-friendly low cost Redbox!

        • Visitor [Join Now]
          John Small [visitor]

          The studios want you to pay a fair price for their product. $1.00 a night is way undervalued for a new release.

          • Member [Join Now]
            Mark [rb123456789]

            Not true! The studios *want* you to pay an *inflated* price for their product.

            They are just less able to get away with it these days. And while Redbox might be one reason, they are far from the only or even the primary one.

          • Visitor [Join Now]
            John Small [visitor]

            If you believe the studio product is only worth $1.00, then wait 45 days and you can watch it at that price.

            A ticket to the movie theatre is much more expensive than a $2.00 rental of a New Release. Why are you not complaining about that.

            You guys talk like you are communists and want everything for free.

          • Member [Join Now]
            lakrow [jbromert]

            Sounds like capitalism to me – supply and demand. Customers dictate the price of a product not businesses. If customers don’t want to pay a certain price for a product then the price goes down or features are removed to make it cheaper to produce, etc. If the product still doesn’t sell, it’s discontinued.

            I see no connection with communism there or the need for rude, childish comments like that. What I do see from your unending and repetitious comments is that you seem to have a vested interest in seeing the studios get more money from their products then they’re worth. That’s fine, but like I said, in a capitalist society with supply and demand, that’s just not going to happen. It’s also why your devaluation mantra is untrue, it’s not devaluation, it’s what the product is worth – what people are willing to pay.

          • Visitor [Join Now]
            John Small [visitor]

            Customers will always be happy to pay less. That does not mean that it is profitable though.

          • Member [Join Now]
            lakrow [jbromert]

            Nor does it mean that it can’t be profitable. If you’d read my post you’d see that I said, “If customers don’t want to pay a certain price for a product then the price goes down or features are removed to make it cheaper to produce, etc. If the product still doesn’t sell, it’s discontinued.”

            Companies (the studios in this case) have three choices: 1 – continue to sell at a price that consumers won’t pay (unprofitable), 2 – change/remove features or business model to make it cheap enough to sell at a price consumers are willing to pay (profitable) or, 3 – discontinue an unprofitable product.

            Do you remember the long forgotten phrase, “The customer is always right”? If you keep your customers happy (price, service, etc.) then your business will do well, if not… well, by your own words the studios aren’t doing so well.

            The studios want everyone to change back to an old model even though history shows that when THEY change with the times they do better and don’t alienate their customers. As an example look at how they fought VCRs and home video in the late 70s/early 80s (can’t remember exactly when now). They went on and on about how it would kill their industry, but when they lost that fight they found they were making more money than ever off of home video sales and rentals.

            No matter what the studios do, if they don’t change with the times things will only get tougher. If they force Redbox to change or Redbox goes under something cheaper, faster, easier, better will come along.

          • Visitor [Join Now]
            John Small [visitor]

            The entertainment industry was making plenty of money before Redbox. It will make plenty of money after Redbox. There is no need for them to devalue their product just so one player can try to survive.

            Personally, I’d rather see Redbox adapt to the situation instead of slowly grinding themselves into non-existance.

            That is why Lowe has got to go. His vision is tunnel and he is leading Coinstar off a cliff.

          • Member [Join Now]
            lakrow [jbromert]

            Either you’re not reading my posts or your replying to someone else’s. I have no idea, since your post doesn’t make a whole lot of sense in reply to mine. You seem to be doing that with others as well. I, for one, won’t bother to reply to you again since you seem to be reading some imaginary posts.

      • Visitor [Join Now]
        acdahl [visitor]

        No, they won’t. They actually care more about the non-viewer, because that is who they want to add to their customer base. They view the customer as a lemming that will run off whatever cliff is put out by them. The only time the studios will really care is if the profits dry up.

      • Member [Join Now]
        ChadCronin [chadcronin]

        You must not read my posts. I have spent alot of money this year buying Blu-rays, many between $25 and $30 dollars each. I have also spent alot at theatres which even here in Iowa are up to $10 for late night shows in large screen theatres. The point I was making with alot of my posts is that if I know a movie is good I have it covered with either the theatre or Blu-ray purchase. It’s those iffy movies I get from Redbox. I feel/know most aren’t worth even $5 to rent. If they were even ok, like someone else stated, it would be smartest just to wait for them to show up @ Walmart in their discount bin/shelve area and get it to own. Having increased pricing, lower selection, and less promotions is just incentives to get people to not rent as much which right there lowers the money the studios are making, and it really hurts when I probably buy 3 or 4 less movies month because I tried less movies a month. I will never blinding buy titles again after being burned, also because of high theater/Blu-ray prices I am alot more picky on what I get versuses even 5 years ago. If studios think most people are idiots that will go anywhere and pay anything just to be entertained by mediocre movies, then they must really think trying to control or shut down Redbox will pay off. It won’t. The internet has helped us all see what greedy/uncaring people they are. I will continue to enjoy movies as much if not more than the next person, but I will value my money more and can and will find ways to entertain myself @ a fair price.