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The Future of Redbox: Part 3

This is part 3 of the 3 part series “The Future of Redbox”. Read parts 1 and 2 here: part 1, part 2.

It has been an interesting past week in the world of Redbox. Redbox made a deal with another studio, but also saw 2 other studios try to limit their success. Now Redbox has filed a suit against one (Fox), and another suit (with Warner) may be just days away.

I planned out the 3 posts in this series in advance, and knew exactly which topics I was going to cover in each one. However, the events of this past week could change the future of Redbox – and even the DVD rental industry – forever. Let’s see where this rabbit hole may lead us…

The basis of this post comes from a simple quote from an interview Redbox President Mitch Lowe did about 2 weeks ago. I didn’t cover this interview, but instead decided to write this series. Here is the quote:

Though digital media is not anticipated to immediately increase, Redbox is well positioned to succeed in both the digital media and physical media space. Our future strategy encompasses both “clicks” and “bricks.” We have what no other digital distribution company can claim: a physical presence through our retail partners at over 17,000 locations and growing. And, we are uniquely positioned to host conversations with our customers throughout their consumption of entertainment media, in whichever format they prefer.

Do you see what Lowe is pointing to here? Look at the quote again, with emphasis added:

Though digital media is not anticipated to immediately increase, Redbox is well positioned to succeed in both the digital media and physical media space. Our future strategy encompasses both “clicks” and “bricks.” We have what no other digital distribution company can claim: a physical presence through our retail partners at over 17,000 locations and growing. And, we are uniquely positioned to host conversations with our customers throughout their consumption of entertainment media, in whichever format they prefer.

A very telling quote, indeed, Mr. Lowe. Clearly, Redbox is not just looking to milk the DVD cow for the time being, but they have a future strategy that includes digital media in no small way. The question is: how will they do this?

This is where the events of the past few weeks really come into play. As can be seen by recent deals they have made, Redbox wants to have the studios on their side. The deals with Sony and Lionsgate are a step in the right direction of Redbox wants to enter the digital media game. But, the less helpful relationships Redbox has with Universal, Fox, and now (possibly) Warner take them away from making their digital future a reality.

Why are these deals so important? The studios completely control the distribution of their films through digital media. There is no “first-sale doctrine” that Redbox can call upon to distribute films digitally: they must work directly with the studios in revenue-sharing agreements.

In recent days I have used some strong language – even if Redbox has not – in the recent “delayed release” demands Universal, Fox and Warner have made. I think it is a terrible – not to mention stupid – move by the studios as they reach out to try to grab as much money as possible as their business models continue to fail. Most of these same companies are also in the music business: do they not know that the movie business is heading in the same direction?

While these things I have said are my words and not Redbox’s, you can still feel the disdain and somewhat “neener-neener” attitude Redbox has with these studios, in light of the first-sale doctrine being on their side. I believe I am just saying what Redbox is really thinking, and that might not be such a good thing.

Redbox knows the future is digital. While it might not happen this year or next, it will happen in the next 5 years, just like it did to the music business. I mean, who still buys CDs anymore? I haven’t bought one in years. Today, I rarely buy DVDs. It has nothing to do with Redbox, I just simply don’t see a need to buy a movie on a dying medium, when I know I will have much easier access to anything I want to watch in the future. In the meantime, companies like Redbox and Netflix get my entertainment dollars. If it wasn’t for them, I just wouldn’t watch movies much at all.

So, the bottom line is that Redbox wants to enter the digital space. They will likely do so by leveraging their kiosks and website. While they probably won’t turn their kiosks into the next “drive-in”, they will need the big studios to make their dream a reality. Can they still do it?

Share your thoughts in the comments, and be sure to share this post with anyone you know who likes to watch movies, as the future of the industry may well depend on you (and them).

71 Responses to “The Future of Redbox: Part 3”

  1. Visitor [Join Now]
    FoxWins [visitor]

    The future of Redbox is that it’s business model is jacked. Redbox will have to drive to Best Buy and other retailers for 50% of its inventory. Not only will this increase Redbox’s costs, but these road trips will also serve as logistical nightmares.

    $1 rentals and day 1 availability? You misers will have to kiss one of the two goodbye. Which is more important to the misers?

    • Administrator
      Michael [administrator]

      You have been posting this same rehashed stuff here for days. Whether or not you are right is unknown, but it seems to me that you are a shill for another business.

      Will you come clean? My guess is “No”…

      • Visitor [Join Now]
        ComeClean [visitor]

        Speaking of a shill for a business, what about this site? Will you come clean? My guess is “No”….

        • Administrator
          Michael [administrator]

          You are kidding, right? Do you even read this blog?

          I started this site because I thought Redbox was a cool idea and enjoyed getting movies from them. But, I certainly am not a shill for them and am happy to call them out when they do dumb things. Just look around, and you will see what I mean.

          • Visitor [Join Now]
            pinpoint [visitor]

            FoxWins seems really happy no matter what his involvement is. He is either part of a studio or owned some crappy video store somewhere.

    • Visitor [Join Now]
      Jody [visitor]

      First off, we are all people with names, so by stating ‘the misers’ you are really looking like a fool. You better take another look around. There are more of us than of you. Recognize the fact that people like a good deal. I am sure you are not an idiot and realize that the economy is hurting good hard working people. Redbox is one of the very few outlets we have to do something fun for very little. I know I am not the only one who believes that if our $1 deals go away, we wont be putting that extra $20 we don’t have into buying new release DVD’s. I will either wait a month or others will *find* a way – I can assure you that. So, how are these companies going to be making more money in the end??

      • Visitor [Join Now]
        Tim [visitor]

        Jody, it seems the studios think we (customers) can somehow produce money. They think that somehow we’ll come up with more money to rent DVDs if the price were to magically go up. They don’t think the way we do.

        Personally, when a movie comes out, I rate it as “I want to see it”, “worth a rental”, or “not even worth a rental.” That criteria changes if the rental price changes. At $1, there’s a lot more “worth a rental” than at $3. So, considering my income hasn’t gone up in this economy but my expenses have (like many), my fixed dollars can be divided by $1 rentals or $3 rentals, but the total dollars is the same. You get it. We get it. But they don’t get it.

    • Visitor [Join Now]
      Danny Clayton [visitor]

      It is funny that someone would come on this site and call people that use a legal means to rent dvd’s “misers”. I call anyone spending more than a dollar to watch brand new dvd’s “idiot”. As for driving somewhere to purchase a new release, well, since a lot of the machines are at Wal-marts, the person filling the machine could easily purchase a new release in bulk and still make a profit. I guess anyone that whines about red box would think this would be too difficult because they lack common sense so they can continue wasting their money purchasing dvd’s or renting them from other sources while people with a clue only spend a dollar at a time

    • Member [Join Now]
      pepsiolic2000

      I can excuse your ignorance but just because someone likes to use redbox does’nt make them a miser. I frankly don’t appreciate anyone who thinks they are better than their fellow man, they don’t seem happy with life in general. Sorry for you.

  2. Member [Join Now]
    Schnarr [schnarr]

    I don’t understand what is meant by “digital media”. Please explain!

    • Administrator
      Michael [administrator]

      “Digital media” generally refers to any type of media that does not require a DVD/CD. So, music has pretty much all moved to a model where you buy/download it online and put it on your iPod. No need to goto the store, get some shipped, etc…

      In movies, one of the popular forms of digital media is “streaming”, like Netflix “Watch Instantly”, video-on-demand, Amazon Unbox, etc… Similar is Apple’s iTunes on the AppleTV, where you buy/rent the movie from Apple and watch it right on your TV.

      • Visitor [Join Now]
        Michael R [visitor]

        Hello,.. I wanted to say my 2 cents,.. REDBOX is by far the best Kiosk, I tried Blockbusters Express the other day and it just didn’t tickle my fancy as much as Redbox, haha,.. I am sorry to see the problems the studios are making for Redbox, It makes me want to SHun from those studios giving problems and lean more to the studios that are working with Redbox instead,.. Digital media, this is nice and yes is the future, I sometimes use Amazons Unboxed, but my DSL is so slow, it usually takes several hours for me to download a movie to my computer,.. I love Streaming I almost Live on Hulu,..I am glad Michael cleared up my thoughts on Digital Media cause when I heard that here, all I can think of is waiting in line at a Kiosk while some Smuck downloaded his Ipod from the Kiosk, hahahaha,.. Hopefully it won’t go that far,.. and he can download from Home,.. :)

        I am slightly worried that Redbox may be Over Saturating a little, they just put in several machines in the neighborhood, it’s like Every Store I go to now Has a Redbox, is this the method to the madness,.. haha…

        Ok, im going now, going to try to get that vision of downloading from the Kiosk out of my mind, hahahaha,..

        Michael R

        • Visitor [Join Now]
          piglets [visitor]

          One of the outside redboxes in my hood just added a 2nd one. I’m thrilled. Means more movies for all of us. Must have been a call for it, or they wouldn’t have put in the 2nd. To top it off, there are two others on the same block. One inside, doors close at 10pm the other inside is 24 hrs. You can’t have too much of a good thing. :o)

        • Visitor [Join Now]
          M [visitor]

          The closest Redbox to me is 15 minutes, the next another 20. Hope digital doesn’t come too soon, your slow DSL may be bad but there’s only dial-up available here.

  3. Visitor [Join Now]
    Rod bennett. [visitor]

    Often go to a movie and if I like will see it again on a DVD. I think the studios are just hurting themselves by doing this to Red Box. Who wants to pay BlockBusters and Hollywoods high prices when you only want the movie for one day. If I rent by mail and watch the movie as soon as i receive it my movies will be delayed because I watch too many. GO REDBOX! P.S. If you need help you get an immediate response from REDBOX!

  4. Member [Join Now]
    L Sophia [l-sophia]

    I can think of few movies made in the last 5 years that I would want to own. Fox and Warner Bros. need to consider the bigger picture — what happens to used DVD as to resale is really small in comparison to the fact that each year consumers buy fewer and fewer movies and go to see fewer and fewer movies. Digital is the future path for both Redbox and Studios.

  5. Visitor [Join Now]
    FoxWins [visitor]

    Mike – I’m just doing you a favor. Rome is burning and you’re talking about nonsense. The most pressing issue that will decide Redbox’s future is whether Redbox will even be able to continue on its current path given that studios that account for 50% of the market have abandoned it. At this point, discussing Redbox’s digital future is just stupid.

    I’m curious to know, would the cheapos who rent from Redbox prefer to pay $2 on day 1 or $1 on day 30?

    • Administrator
      Michael [administrator]

      I think you are really missing the point. This digital issue is the future, and is what makes what is happening with the studios right now so relevant.

      In just looking at DVD rentals, Redbox has the “first sale doctine” on their side. There is nothing the studios can do about Redbox renting their movies on the release date, no matter how many ridiculous rules they make up. Redbox can simply buy from Walmart, usually at a price of $16-17 per DVD. According to your figures in an earlier comment, that is in line (or cheaper) than they are getting them from wholesalers.

      So, while Redbox might take until Thursday to get the new releases from some of the studios in the box, who really cares? Most redbox customers certainly do not. Will they wait 30 days to get the movie for a $1? I believe many would. But, they won’t have to.

      Now, when you throw digital media into this, that is when things get messy. The bad relations that Redbox currently has with some studios could really hurt them, and completely destroy their future. This is why I am discussing digital media today – it is simply the most important part of Redbox’s strategy, and will make or break them down the road.

      When considering DVD rentals only, Redbox has a lot of options, none of which require their cooperation with the studios.

    • Member [Join Now]
      moviecrazy

      Hey Idiot, why are the people that rent from Redbox “cheapos”? Just because they like a good deal? If you could buy a new car for 20,000 or the same new car for 10,000 would you pay the 20,000? I think not. You’re and idiot but surely not THAT much of an idiot!

    • Visitor [Join Now]
      pinpoint [visitor]

      I used to run a video store a few years ago and we had a $1 wall where movies would go after about a month or two on the regular $3 new release wall. I was always amazed at how many customers considered the $1 wall “THEIR” new release wall. It wasn’t new to them until it was new to that wall….except for a few huge hits.

  6. Member [Join Now]
    Bikemiles [bikemiles]

    As far as I know “Brokeback Mountain” was the first mainstream movie that you could buy via “digital download”. The cost was $19.99. You could buy the DVD for $12 at Wal Mart, get a 24 hour cable for $4 or even rent at Redbox for $1. I heard from some people who watched a pirate download of the movie.

    The point is that the studio way overpriced the digital download of BB. That is classic studio logic. I have Comcast cable. I don’t use the “pay” features but for $4 you can get 24 hour viewing of a movie. Comcast recently moved the release date up to the same day as DVD release. A nice system except for the $4 per day price tag.

    Further down the road Redbox could have either a TV top box or use a DIVX type system to download to a home computer. If you have any kind of broadband you can download a DVD quality movie with half an hour head start. Another future option is $G network nighttime downloads of “DIVX” movies. 4G
    is the recently shut off analog TV channels. Realtime demand would go way down at night.

    The difference is that Redbox is acquiring a huge base of cost sensitive customers. This is both a market and a potential political force. If lawmakers staunchly defend a $4 digital movie download “floor” the people will not be happy. As a corporation Redbox cannot engage in political advocacy but they can report on politicians public stances on issues and report how politicians voted on an issue. Redbox has a huge and growing email list. I could add a “news” section to it weekly “new release” email, to give an example.

  7. Visitor [Join Now]
    FoxWins [visitor]

    You’re simplifying Redbox’s problem. Its costs are increasing rapidly. Before direct studio deals, Redbox was paying a net of maybe $12 ($17 upfront with a right to resell for a few $). With direct deals, Redbox seems to be paying $15 with no right to resell (must destroy). And with no studio deals, the cost will be even higher. That’s tremendous margin erosion in a span of a few months.

    But even more important is the logistical hurdle of relying on retail for 50% of your inventory. Can you imagine these clowns driving to multiple retail locations buying up every retail copy in order to stock 17,000 kiosks? It’s like a sequel to Harold and Kumar. This scenario might have been workable when it was just Universal titles. But it will be an absolute nightmare now that Fox and Warner have joined in and as the number of kiosks increases.

    Even if Redbox continues to stock titles from Fox, etc., you can bet that Redbox will be stocking far fewer copies. Not only is the ROI not there, but it’s going to be too difficult to get a sufficient number of copies from retail.

  8. Visitor [Join Now]
    FoxWins [visitor]

    Hey Mike – Here’s a blast from the past.

    http://www.videobusiness.com/article/CA6642127.html

    And here’s a gem from the article:

    Universal “obtained the agreement of Best Buy and other retailers to cease or severely limit their sales of Universal DVDs to Redbox,” the kiosk operator said in yesterday’s filing. “In at least one instance, a Redbox employee was escorted out of a retail store for attempting to purchase multiple copies of a Universal DVD title.”

    Expect much more of this. You think that Redbox employees running into Walmart trying to buy 50 copies of a title will set off any alarm bells with the retailers?

    • Administrator
      Michael [administrator]

      What you are chronicling there is likely illegal activity by the studios. Sure, they can say Best Buy “voluntarily” decided not to sell the discs to Redbox. But then, there is a good chance that discriminating in that way could be deemed illegal by the courts, too.

      Listen, I am all about capitalism, and businesses being able to run their business how they see fit, including the studios. I just think it is a bad business move that only hurts consumers, and ultimately that is bad for everyone.

      If studios want to deal with everyone the same one, then that is fine. How about they never sell their discs to anyone, but only license their movies instead? Then say everyone has to pay $1 each time a movie is watched. Does that sound better? Until then, if I buy a movie legally, then I will do what I want with it. If I want to rent it for 25 cents, so be it. If I want to resell it later, great. Whatever works for me. What is wrong with this?

  9. Member [Join Now]
    Bikemiles [bikemiles]

    A month ago I saw a story about Netflicks on ABC Nightline where the founders said that at first they got DVD’s from Best Buy. There is a huge wholesale market for the samller sellers and renters of DVD’s. It would require a highly intrusive auditing system to discover sales to Redbox. Also, the Redbox sales are guaranteed sales. Most retailers and stores will take a case or two of a new release DVD if they can send back the unopened cases. If a DVD is in demand and not available for retail that will probably be a lost sale. This will temp distributors to sell “sold cases” to possible fronts for Redbox.

  10. Visitor [Join Now]
    Tina [visitor]

    Well I for one do NOT agree with the “digital age” and I’m of this generation.
    I do still buy CDs when I want one bad enough because it’s not a dying medium at all! CDs last for a long time and your computer could crash at any time and often does! It gets infected with viruses etc and who can afford to keep junking it up with more and more movies, songs etc? Who’s got the space for all that?!

    I think it’s a very stupid move for any company to go strictly digital and not offer the rental stores any longer.

    The reason Redbox is so popular is because it’s so convenient for EVERYONE!
    Those who are computer savvy and those who aren’t!
    You just swing by one, pick a movie out, get it, watch it, and return it! A monkey could do it!

    I think if people go digital they will see their sales plummet!
    Not a smart move at ALL especially in today’s economy…

    Just my 2 cents.

    • Visitor [Join Now]
      Colby [visitor]

      You are “of this generation” and you don’t see the huge train coming at you?! ANY physical medium will be practically gone in a few short years. Look around. Who’s got the space? They are building 2 TERRABYTE hard drives as quickly as they built the 20Meg drives just a decade ago. Throw in the fact that there is a big push for CLOUD COMPUTING as the next gen storage locations, and you can bet your bottom the “digital age” will introduce some major changes in the next two years.
      Before you know it, everyone will be connected to a huge cloud database, and you can watch your movie streamed to you instantly, via PC, to your TV (they’re already working on making your TV a hybrid PC anyway!). The next “redbox” will introduce this to the consumer as soon as the technology supports it.
      Gone will be the DVDs and CDs as the vinyl, 8-tracks, and cassettes went.
      Welcome to the future!

      • Visitor [Join Now]
        Sean [visitor]

        If, some day, the technology is really accessable, affordable, and convenient, then I will go with the times and say goodbye to my physical CDs and DVDs. But the technology would have to completely change. The whole market will have to be different: When I go into a store like Wal-Mart, I see stereos on there shelves…the newer ones don’t have tape players on them at all, but other than that they are still pretty much the same. Computers need to get cheaper, seeing as how you MUST have a computer to download music and media and put it on some type of device; MP3 players and such things need to become cheaper, but mainly more reliable; stereos will have to be totally different and have places to plug in MP3 players right on the front as the main part. The same with car stereos. I know, SOME of the more expensive ones do. But that is the nature of the problem. Think of how long it took for cassettes to really die out. And VHS tapes. It wasn’t until there really were no more tapes or tape players for sale until CDs really fully took over. This is especially true with movies. Not until you couldn’t buy a VCR anymore unless it was a combo with a DVD player did VHS tapes really die. There were VHS tapes along side DVDs in rental outlets for years before they stopped getting them anymore.
        This is how different the market will have to be before I stop buying CDs and stop renting and buying physical DVDs. I do not see this happening in the next five years…but who knows. My guess is though that I will be buying CDs and renting discs from Redbox for a good ten more years.

      • Member [Join Now]
        moviecrazy

        WRONG!! Cloud computing may or may not be a thing of the future but I GUARANTEE you that physical media will be around for a LONG time to come!

      • Member [Join Now]
        ariess63

        I, myself like having cds for back up. And the vinyl record is making a comeback. There are even new releases being made. And more turntables have become available for us old folks to play our classics on.

    • Visitor [Join Now]
      Sean [visitor]

      I too still buy CDs. I just turned 27, but it’s not like I’m stuck in the past. I just really prefer the physical CD. I started downloading quite a few CDs (legally, of course) about 4 to five years ago, but I hated it. My MP3 players kept on giving out and not working, and even they only helped my as long as I was cool wearing headphones. In order to listen to music an my home stereo or in my car, I still had to have a disc. So I had stacks of burned discs sitting in spools of 30. Very ugly…an eyesore to be sure. I’ve seen the I-pod docks where you can plug your I-Pod into them and listen like a stereo, but I’ve only been able to afford cheaper brands of MP3 players, so I can’t use any of those apple accesories anyways. Besides, those docks are tiny, I like my music LOUD. So I quit downloading CDs. I now have a nice collection of a couple hundred or so CDs on shelves that looks quite nice and is fun to play with and rearrange and what not. All from the past few years.

  11. Member [Join Now]
    Mark [rb123456789]

    Mitch Lowe’s quote is not surprising since he jumped to Redbox from Netflix.Their digital strategy is similar. What is surprising is that he has directly gone to battle with the studios, something Netflix didn’t do.

    And something Blockbuster isn’t doing either, even as their late-to-the-market kiosk initiative is launching. I think could be hurt more than Redbox, yet their CEO called the Warner move “a competitive opportunity” for them.

    The future is based on deals, something Redbox has had decidedly mixed success with. Hopefully a lot of this is just sabre rattling and deals will get done in a way that doesn’t hurt the consumer too much. I am not particularly optimistic about that though.

  12. Visitor [Join Now]
    piglets [visitor]

    Hi Foxwins, when someone wants to get away with something, they find away. It happens everyday of the week.
    I was very pleased that redbox came on the market. We are having a hard time with our income and the only place we spend money for fun is on movies. So this allowed us to see new releases. Many times the chain DVD rentals would be out of the movie we wanted to see. Nexfix became a joke. I used them when the first started up and it was a good system. As the grew, it all went down hill.
    Also, I’m a night person and can hit an outside redbox when it moves me to do so. I love that. As for buying movies, we did. I figured to own was only $12 or so more than renting. But as I stated, money just isn’t here. I will buy a movie that I’m really looking forward to seeing and feel that I’d want to see it again.
    Our married children can’t even afford to rent at redbox. But when things do get better for all of us, I could see that they would do the digital download method, were as of now, I don’t think I ever would. If it comes to the point where they are no longer making DVD’s, we’ll see.
    How this is helpful on both sides.

  13. Visitor [Join Now]
    Amy [visitor]

    What is the difference for the studios to have a movie rented from a store for 3 bucks for 3 days, or from Redbox for 1 dollar for 1 day? How on earth is it hurting sales?

    Also, if you buy your copies from Wally (or any place else) aren’t you required to stick to the distribution warnings that we all ignore at the beginning of the disk?

    • Visitor [Join Now]
      piglets [visitor]

      Yeah, I don’t understand either. To me, a sale of a DVD is a sale, what dif what they rent it for. What if I bought a DVD and let all of my family and friends watch it?

    • Member [Join Now]
      Mark [rb123456789]

      I can think of several ways it hurts sales. First, if Blockbuster wants the movie to be available for rental to three people during the same 3 day period, Friday through Sunday nights for example, they need to buy 3 copies. Redbox only needs to buy one.

      Second, no way Blockbuster and other brick and mortar stores can meet the $1 a night price for new releases long term. If Redbox puts a lot of them out of business that hurts DVD sales significantly.

      Third, Redbox has limited kiosk space. Once the demand for a title is drying up it needs to resell its copies, dumping them on the market often only 2-4 weeks after release. People know that by waiting just a little time they can buy it for $6 instead of $25, so Walmart and Best Buy (and therefore the studios) lose sales. That’s why the Redbox deals with Lionsgate and Sony prohibit sales. This is probably the studios’ biggest complaint.

      Finally, studios think $1 rentals “devalue” the product and people start expecting all movies to be cheap and not buying them if they aren’t. How much this is a problem is debatable, but you can certainly see based on the comments on InsideRedbox that some people think this way.

      As to the FBI warnings – they are about copyrights, i.e. copying the DVD or charging admission to view it. The law known as the “first sale doctrine” protects your rights to do with the actual DVD as you please, including resell it or rent it.

      • Visitor [Join Now]
        Daniel [visitor]

        The studios need to realize it is time to devalue DVD’s if they wan’t to make sales, its just crazy for them to still want 20 bucks for a new release at walmart, if they want to save money to increase there profit margins they need to stop paying the big name actors 20+ million a movie and instead throw a couple thousand to a writer capable of writting a movie worth watching then they could lower the price and make money cause people would actually want to buy it. This is the same crap that happened with CD’s while the studios blammed napster and illegal downloading it was the lack of music worth buying that is why I and so many other people stopped buying CD’s. But big business will never learn from the past and they will come crashing down.

        And as for digital downloads ,Sorry Micheal, but we may see it inside of 5 years but it is far from being the primary source of movies dvd’s will hold out for a long time as far to many people in this country prefer a physical disc to data on a hard drive and good enough internet at resonable prices is still to far down the road for many and the average home computer is not connected in anyway to the main living room big screen for digital to get anything more then a foothold for at 15 years.

  14. Member [Join Now]
    Bikemiles [bikemiles]

    Foxwins posted: “Universal “obtained the agreement of Best Buy and other retailers to cease or severely limit their sales of Universal DVDs to Redbox,” the kiosk operator said in yesterday’s filing.”

    If bulk purchase prohibitions are discriminatory this could constitute an antitrust violation. This is a couple of years back but a friend worked at a video store. We would watch new releases the weekend before Tuesday release. For several video stores they would get a case of movies.

    Two legal strategies that Redbox might use. One is a violation of the “fair trade law” prohibitions. Studios allow DVD’s for rental but not at a $1 per day price. Fair Trade laws were outlawed in the early 1960’s.

    The next is anti-trust laws. Again, these are “popularity contests” but if “politician A” wants you to pay $4 per day for DVD rentals and “politician B” favors $1 per day rental who will “the people” tend to support?

    Right now Redbox has 17,000 kiosks. If you take 1,000 casual users per kiosk (for a round number) that is a “constituency of Seventeen million households. I’d guess that 99% favor $1 per day rental with under 1% of these users favoring the studios.

  15. Visitor [Join Now]
    FoxWins [visitor]

    Mike – Nothing illegal about preventing Redbox from buying in bulk from retailers. If you’re buying more than 10 of a title, it’s clear that you’re not buying for your own retail purposes.

    Look, lots of retailers like Walmart use dvds as a loss leader. Walmart lures you in with cheap dvds and then sells you something else.

    If Redbox goes to Walmart and buys up all the retail dvds, there are 3 problems. First, the retailer doesn’t get the loss leader benefit, since Redbox is just looking for dvds and nothing else. Second, if Redbox buys up all the dvds, then consumers genuinely wanting to buy the dvd will be out of luck. Third, dvds being sold at retail are supposed to be for retail purposes, not resale or wholesale purposes.

    Also, assuming that Redbox wants to stock 10 copies of Fast & the Furious at each of its 17,000 kiosks, it will need to buy 170,000 copies. How many Walmarts will Redbox need to visit in order to get this many titles? Like I said, logistical nightmare.

    • Administrator
      Michael [administrator]

      Well, I think it indeed may be illegal for Universal to dictate this, but if it is a store-wide Best Buy policy, than it is likely not a problem.

      I don’t disagree that it is a logistical problem, and I don’t claim to know what the additional cost to Redbox is when having to do this. It obviously exists, but apparently Redbox finds it still profitable enough to do so.

      Lets look at this situation through the lens of the music industry for a minute. What is the cost of a music CD? About $15 right, and has been for quite awhile. What is the cost of a music single on CD? $3-5 right? Now, how much does it cost to buy a single on iTunes? $1-$1.29, right? So, the “single” has gotten much cheaper recently, right?

      Now, how much does it cost to buy a DVD? $15-20 right? How much does a rental cost from Blockbuster? $3-5, right?

      Do you see a pricing trend here? What is the next obvious pricing trend for movie rentals? I would argue that the answer is $1-1.50.

      If I were a movie studio, would I be looking to protect my revenues? Absolutely! Would I do it by jumping in front of moving train and yelling “STOP!”? Don’t think so.

      It is time for studios to adapt to the changing market, and there are many ways they can do so. Maybe that is a good subject of another blog entry in the near future.

  16. Member [Join Now]
    Mark [rb123456789]

    The obvious answer to your last question is “just 1 copy at each of the 170,000 Walmarts in this country” ;)

    “DVDs being sold at retail are supposed to be for retail purposes” is the studio’s wish but not the law. How many other products have different pricing based on how it will be used? The only major one I can think of is airline travel, and the airlines can’t actually say “businesses must pay more”, they can only put restrictions on travel which favor leisure travellers because they have limited capacity and it’s a service not a physical product.

    Clearly the issue of whether the studios can impose restrictions is an open question, being litigated by Redbox and Universal right now. If one side were clearly and unambiguously going to win they would have sought injunctions before the suit goes to trial.

  17. Visitor [Join Now]
    FoxWins [visitor]

    Mark – re “‘DVDs being sold at retail are supposed to be for retail purposes” is the studio’s wish but not the law”

    It’s not just the studios’ wish, it’s also the retailers’ wish. Retailers like Walmart sell new dvds at a discount (loss leader) to lure you in so that you’ll buy something else.

    Now, if I’m a retailer and I know that Redbox comes in every Tuesday, buys all of my dvds at a discount, and then simply leaves without buying anything else, what’s my incentive to continue selling dvds at a discount?

    If I were the retailer, I’d jack my dvd price to the full retail price of $25. There’s no need to give Redbox the dvd for $18 when there’s no associated loss leader benefit and Redbox’s actions are preventing consumers who legitimately want to purchase my dvds from doing so.

  18. Member [Join Now]
    Bikemiles [bikemiles]

    If Wal Mart of whoever wants to universally limit quantity sales to all that is probably legal. If the limits were selective that would be illegal. If someone else comes in to WalMart and they are allowed to buy more than ten copies that would be illegal discrimination.

    Going back to “Brokeback Mountain”, that had huge “pre-sales” but I was looking at “street” evidence of sales. Several Twin Cities, MN Wal Marts had “standee” displays with over 100 copies of the DVD. I periodically checked the Wal Marts and the standees seemed pretty full. Also, I would check out Redbox’s when I was near one. The burb RB’s would be out more often than urban but RB kiosks usually had it in stock. (go figure). This was research for an article on how DVD sales figures can be “ginned” by pre-sales rather than scans. I’l bet that Wal Mart didn’t “eat” the unsold standee stock. (about the movie “Brokeback Mountain” people who watched it told me it was “really boring”. Bravo cable had it on one night so I watched a few segments. Way too much “dead time” and quiet. Ang Lee grew up in Taiwan, I’d assume in dense urban hustle and bustle. He way overdid the “quiet” of 1960’s rural Wyoming.)

    Anyway, if you limit sales you need to do it across the board. If a religious group wants to buy up large numbers of “Faith Like Potatoes” Wal Mart or whatever has to limit sales.

  19. Visitor [Join Now]
    FoxWins [visitor]

    Bikemiles – Pretty sure that most retailers have rules in place, but it’s difficult to enforce.

    What Redbox probably does is send out a team of people to buy dvds on street date. Five or so Redbox employees probably enter the store at the same time with each buying 10 copies in order to disguise the fact that a single entity is actually buying 50 copies.

    Can you just imagine Redbox rolling up to Walmart, storming out of a van like the A-Team, buying Walmart’s entire stock, and then rolling up to the next retail stop? What a bunch of clowns.

    When Redbox does this (buys all of the retail copies), retailers and consumers both lose. Consumers who legitimately want to purchase the dvd will be out of luck. And retailers sell something that’s worth $25 for $18 and get no associated loss leader benefit.

    If I were a retailer and knew that Redbox was coming in, I’d jack the price of teh dvd to the full retail price.

    • Member [Join Now]
      Bikemiles [bikemiles]

      Walmart or other “big box” stores can easily program their scanners to limit quantities. If Walmart want to limit DVD sales to let’s say 2 copies per person per day this is probably legal as long as the limit isn’t selective.

      Let’s get back to “Faith Like Potatoes”. Admittedly it’s a hokey movie but it deals with post Apartied South Africa and Zimbabwe on a “street” level. I have researched this. Someone contacted me who wanted to teach a class on post apartied rural South Africa. I recommended “Faith like Potatoes” DVD for each member of the class so everyone was on the “same page”. That indie distributor would probably offer free shipping if you bought a case of the DVD’s but if these were “dogs” for Wal Mart (or whoever) they could not sell fifty copies retail if they otherwise had sales limits on DVD’s.

      I often use the phone company as an example of anti-trust when I say it is a “popularity contest”. “Ma Bell” turned “evil”starting in the 1960’s. For me it was ordering a basic black rotary desk phone. I could not order the phone until I listened (literally) to a sales pitch for a Mickey Mouse desk phone. I was game for the fight and it took two hours arguing with assorted supervisors about how I didn’t want to hear of the “options”. This was common and it led to things like the Saturday Night Live phone operator skit. Even my father got in the act when the phone company called and said they needed to replace our twenty year old wall phone. Oops! The repair guy “just happened” to not have a black one but different color phones were available for five or ten dollars. My father balked. The repair guy called a cab to deliver a black phone no charge replacement.

      My father told everyone about this “war story”. I told everyone about my phone “war story”. Seems that a lot of other people also did this. When it came to phone deregulation nearly everyone in the general public thought of “Ma Bell” as “the wicked with of the West” (think Nancy Pelosi).

      The point is that when it came time for votes on phone service changes there was little public sympathy for “Ma Bell”. Same for the Hollywood studio executives. Increasingly the public thinks of them as cocaine/crack heads who stop progress and consistently make the worst possible decisions.

      That said this is an interesting discussion. Who would think that we would be scrapping over $1 DVD rentals.

  20. Administrator
    Michael [administrator]

    Another great conversation regarding the reasons the studios are stupid for doing what they are doing is happening at TechCrunch right now.

    Take a look…
    http://www.techcrunch.com/2009/08/14/the-movie-studios-have-a-great-idea-to-ramp-up-piracy-and-blockbuster-wants-to-help/

  21. Member [Join Now]
    Bikemiles [bikemiles]

    So let’s say I start up a shell corporation “Bikemiles Movies” and order a case of a movie. Will a distributor care if I buy a case of new releases? Let’s say I rent or sale at bars or workplaces ala Avon. The IRS doesn’t care about such shenanigans so long as you you pay the taxes.

    Great discussion going on here. I will now check out http://www.techcrunch.com/2009/08/14/the-movie-studios-have-a-great-idea-to-ramp-up-piracy-and-blockbuster-wants-to-help/

  22. Member [Join Now]
    Bikemiles [bikemiles]

    Good article. All should read. http://www.techcrunch.com/2009/08/14/the-movie-studios-have-a-great-idea-to-ramp-up-piracy-and-blockbuster-wants-to-help/

    First off there is price. If Comcast offers me new release movies at $1 per day I will choose this over Redbox. Now Comcast is $4 per day.

    Next off, my neighborhood has a classic second run theater which I try to support. http://www.riverviewtheater.com/ In the past few years they have had movies a few weeks past the DVD release. Often, if I like a Redbox movie and it’s playing at the Riverview I will call up a woman for a movie date. $3 movie tickets are my kind of date and, gosh! I am so “knowledgeable” in my post movie comments. Here DVD rentals actually increase second run movie viewing. For the Riverview, a true gem, Redbox DVD haven’t hurt business. This magnificent theater is unique in the Twin Cities, MN but many people come to watch movies here after they have seen them of DVD, usually Redbox. I have talked to many people in the Riverview lobby about this. It’s pre-sreening via Redbox DVD before the date or kids.

    Redbox can’t hold a candle to a classic 1950’s 700 seat theater updated to 12 channel digital sound and Redbox doesn’t try. http://www.riverviewtheater.com/ is a neighborhood institution
    very near my http://searshouse.com that seems enhanced by Redbox. A good movie is far better at the magnificent http://www.riverviewtheater.com/

    Again, anti-trust law is a “popularity contest”.

  23. Visitor [Join Now]
    Movie King [visitor]

    Wow. Who really cares? Lengthy, multiple e-mails. ZZZzzz… It will all sort itself out like it always does. Who cares if it’s Redbox or XYZbox. A good product at the right price will win and competition will drive it.

  24. Visitor [Join Now]
    Ginnie [visitor]

    Well, I guess I’m just a “miser” and a “cheapo”. We are retired and on a fixed income so Redbox is a great deal for us. Besides, there aren’t that many good movies out there that I would pay to see in a theatre.

  25. Visitor [Join Now]
    Rick [visitor]

    The digital model has a key flaw that could squash it like a bug. The studios, Redbox, Blockbuster, NetFlix, etc, don’t own the bandwidth to the end user. I assure you that as more and more movies are moved across the Internet, there will be more traffic caps and much higher ISP charges. Comcast, AT&T, etc, aren’t going to be footing the bill to add bandwidth to enhance the distribution path for Blockbuster, NetFlix, etc. The current digital business model is similar to if I started a manufacturing company and expected UPS to deliver my products to my customers for free. Something is going to give and the end user will get caught in the crossfire.

  26. Visitor [Join Now]
    JenC [visitor]

    Other than RedBox, libraries are the only other way I “rent” movies. To me NO DVD rental is worth more than $1/night. If I wanted to see the film that badly I’d have already seen it in the theater. Funny, but I’ve only been to the theater once in the past 3 years.

    • Visitor [Join Now]
      Sean [visitor]

      My sentiments exactly. Every word. Except for me it’s been even longer than three years since I’ve seen a movie in a theater…and that was a dollar theater.

  27. Visitor [Join Now]
    Eric Schatz [visitor]

    Interesting…isn’t it most likely when Redbox talks about entering digital media, what they mean is some kind of dvd-burning vending machine? No worry about a supply of tens of thousands of copies of Wanted when all you need is a 6 GB file you can download to a kiosk on demand.

  28. Member [Join Now]
    lumin47

    Does anyone know if the “Entertainment Weekly” promo code offers

    are 1 time use codes only?

  29. Member [Join Now]
    Bikemiles [bikemiles]

    For the end consumer such as myself it all about pricepoint. I originally rented VHS tapes from a shop that offered $1 per day mid-week. After I moved I stopped renting and watched on non-premium cable or at the nearby http://riverviewtheater.com until Redbox came here a few years back.

    Let’s say that with advanced data compression you can get movies at near DVD quality at 1 GB per hour. (just a guess). This might be a lot for reliable live streaming but you can download with time with anything faster than a dial-up connection. If I reserve “The Slow and the Slumbering” in advance it can be ready on my hard drive in DIVX or other formats that self-destruct 24 hours after I first hit “play”. Comcast Cable does this now but they want $4 per day.

    A bit down the road the 4G phone network might be used. This is the old analog TV spectrum. Radio spectrum capacity is “use it or lose it”. Without cable or broadband someone could order a new release movie for a 24 hour use. The download would have low 4G priority. The box would have “download status” display on the LED screen. If it took too long you could cancel. If in DIVX it would expire 24 hours after play but keep in on the hard drive if there was space. If you want another 24 hours for $1 or whatever order it and get a code or a 4G release sent. From the viewpoint of the end user the system will be simple.

    I have a couple of systems that allow me to use my computers (with over a terrabyte of available storage) like a VCR but I still rely on VHS tape. The reason is that, at a garage sale, I got a 13″ TV with VCR for $10 that I use in the kitchen. I actually still have two working Beta recorders but use them only for playback because working Beta’s are hard to find.

    I don’t know if the download or 4G low priority systems will be used but they show the options that will be available. The problem is “rights”. I first studied this more than a decade ago with written material and “books on demand”. Same BS. The “majors” wouldn’t give rights even though used books caused them to lose most of their original business.

    I have no idea what Comcast pays for a day of release Video on Demand per order but if they try to charge Redbox or whoever more this could be triple-damage anti-trust violation. As I said anti-trust is in large part a “popularity contest” but not many voters favor $4 per day “rental versus $1 per day.

  30. Member [Join Now]
    Bikemiles [bikemiles]

    Here is an interesting story from Google news.

    http://www.examiner.com/x-9582-Riverside-County-Family–Parenting-Examiner~y2009m8d14-Redbox-big-hit-with-families-on-a-budget

    I’m sure you’ve seen these big RedBoxes in many grocery stores, I know I have. But I didn’t stop to really see what the fuss was about until one was installed in my local store, that’s when it got my attention. My kids already knew all about it, and were excited to see one so close to home. Now I’m addicted to this big RedBox movie rental.
    Redbox is an automatic movie vending machine, with a variety of movies along with current hits. With 15,000 locations popping up everywhere, including our neighborhoods, Redbox should create enough of a buzz and competition to get the attention of the other competitors and promt better deals and offers to keep you as a customer.
    This is what I find so appealing:
    · It’s only $1.00 to rent (+ tx)
    · No late fees
    · For another buck, keep it an extra night if you forgot to return it!)
    · Displays recent hits
    · It’s affordable
    · It’s convenient
    · Return to any Redbox location without any penalties
    · Reserve movies online

    My son and I walk, or ride our bikes down to our grocery store to either rent or return the movies, so I’m squeezing in a little exercise, more importantly I enjoy the time with my son. While at the store, we’ll pick up popcorn, or ice cream or what ever suits our fancy. At a buck a rental, we can afford to splurge a little, and enjoy movie nights with the family on a regular basis. With money being tight these days, going out to the movies is reserved for especial occasions. So when you can get a movie, popcorn, candy, and sodas, all for less than one movie ticket at your local theater, you know you’re getting your hard earned moneys worth!

  31. Member [Join Now]
    Bikemiles [bikemiles]

    Here is an LA Times (blog) article with some money numbers.

    http://latimesblogs.latimes.com/entertainmentnewsbuzz/2009/08/lions-gate-playing-nice-redbox-for-158-million.html

    That on top of $460 million projected for Sony.

  32. Member [Join Now]
    Andy K [andy-k]

    wow lots of talk and conjecture.. but it will all shake in time and we/individually out here really don’t have a loud enough voice to make make a difference. BUT … i still like $1 movies at Redbox…

  33. Visitor [Join Now]
    kally [visitor]

    Seems like redbox can work around it’s unfavorable relationship with Fox and Universal by taking advantage of its relationship with Walmart. I assume since they have kiosks in Walmart stores they have built a relationship with the retail giant. They could work an agreement with Walmart to buy bulks of new releases that are put aside for redbox and not shelved. Walmart could even order more copies from the studios to compensate and then sell the redbox copies at non “loss leader” prices. Fox and Universal can say no to redbox, but cannot say no to Walmart.

    • Member [Join Now]
      mc.incid [mcincid]

      Few suppliers have a relationship with Walmart. Walmart tolerates the Redbox kiosks because they draw additional consumers to the store. But Walmart doesn’t need Redbox and will never do them a favor. And don’t fool yourself; Walmart can drop any studio it wants without a sweat. The studios will bend around Walmart’s demands because they need Walmart, not the other way around.

      Redbox works because it’s cheap and mostly automated. That’s the only reason it still exists. Studios will pull power plays because they want to route Redbox’s revenues back into their own pockets. There’s nothing wrong with this practice, it’s happened for nearly as long as capitalism has existed. Mike’s just editorializing it as a negative thing because reductions in Redbox revenue cut indirectly into his blog revenue. “The Future of Redbox” is nothing more than a self-interest piece.

      • Visitor [Join Now]
        kally [visitor]

        This is exactly what is being stated. Walmart has the studios doing what they want. If they are selling new releases to redbox at a higher price than what they are selling them on the shelves, Walmart wins, redbox wins, and no one is really doing the other any “favors”. Walmart increases their revenue and maintains the redbox draw to bring consumers in, and redbox bypasses the studio demands without having to raid retail stores to buy bulks of new releases.

  34. Member [Join Now]
    ChadCronin [chadcronin]

    I no longer buy DVD’s. I began buying Blu-rays this year after several years of low/no purchases. I buy blu-ray because of the higher video/audio quality and bit rates that are not yet offered online with the special/extra features. I usually go to the theatre to see movies and then buy those. The poor reviewed or less interesting ones I rent from Redbox. If I couldn’t do that through them or at the low price point I just wouldn’t bother. I do buy old tv shows that are not gonna be released in HD from Amazon’s VOD service. I would also say computer storage space as well as bandwith/internet costs would be part of my decision to go from physical medium (Blu-ray) to digital for new release movies in HD. I’m not really sure how I feel about Burning a disc from a kiosk because I like having all the nice printed out artwork and I want the pretty blue plastic case. That’s also the reason I wouldn’t normally buy a used movie, that and the fact that those discs are usually all scratched and damaged.

    • Member [Join Now]
      Bikemiles [bikemiles]

      I am definitely a “price point” (read “cheap”) DVD buyer and renter. The last new release major theater movie I saw was “Twister” in 1996 and that was a bargain matinée. I’ve seen Blu Ray at stores and at epoples houses. Nice but not worth the cost. My largest TV is 32″. If I had a full blown “home theater” maybe but I generally “surf the net” while watch TV or movies.

      I have the magnificent second run http://riverviewtheater.com very near my house so real theater is very close to home for $2 or 3. I took early civil service retirement and do some freelance writing. I’m a bit of a movie script writer “wannabee”. Mostly I research for other writers but the in-depth research gives movie ideas. As I said “wannabee” but if one of my ideas is sold it will likely be to an Indie, rather than a major studio. With Indies especially the commentary extras are often better than the movies themselves and a reason for buying a DVD.

      I’ve noticed that in the last year or two almost all major studios have taken the “commentary extras” off of regular DVD’s. No doubt to push Blue-Ray sales. I miss it but I prefer an Indie director describing how to shoot a sceen on the cheap.

      Also, the major studios put out a lot of “junk” and “propaganda”. Big name movies like “Revolutionary Road” and “Lions for Lambs” were awful. I felt only mildly “screwed” renting them from Redbox. Heaven forbid if I had called up a woman and took her to see either one at the http://riverviewtheater.com , even at $3 per ticket. Big name movies do have good special effects. I will “absorb” these at the $3 seven-hundred seat 12 channel sound http://riverviewtheater.com That is probably a better “theater experience” than more than 90% of first run screens.

      I don’t see Redbox kiosks burning a disk on demand. More like a TV box of sorts or a DIVX type computer download. I’ve only bought a few Redbox “keepers” which have worked fine. I have rented a few damaged DVD’s but Redbox has always credited me. I’m sure that if I bought a bad “keeper” I could work things out with Redbox.

  35. Member [Join Now]
    starman15317

    this might be random but i want some MST3K dvds in redbox!

  36. Visitor [Join Now]
    JonathanX [visitor]

    I work at walmart and redbox is definitely buying new release movies in bulk. Today i had a guy wearing a redbox shirt buy roughly $1500 worth of new release movies (I’m not quite sure on the exact amount because I didnt ring it up… but I know he did it on 2 or 3 seperate transactions using walmart gift cards). I just thought it was odd. Someone stated that this is perfectly legal, but I’m not so sure. Anyways, just thought I’d share what I seen today.

    • Member [Join Now]
      Mark [rb123456789]

      Foxwins always claims it’s impossible to fill Redboxes via the retail channel, but I was in a Walmart today and saw 40 copies of a new release, Redbox could easily buy enough of those to satisfy their demand within the local area.

      As to the legality… why wouldn’t it be legal? You’ve been brainwashed by the studios who lead you to believe they are doing you a favor just to let you view their product.

      If it wasn’t 100% legal to rent purchased DVDs and tapes, the studios (always being afraid of change they don’t control) would have put Blockbuster out of business in 1990 and purchase would be your only option.

      The “first sale doctrine” says if you buy it, it’s now yours and not still theirs to control. Unfortunately this doesn’t translate well to digital and online purchases (which are easily encumbered by licensing and DRM) and is slowly being eroded.

  37. Visitor [Join Now]
    JonathanX [visitor]

    Thanks for clearing that up mark