As Redbox’s antitrust case against several major studios slowly progresses, it’s only natural to think ahead to possible outcomes and wonder what the future may hold for the kiosk vendor. If worst comes to worst and Redbox’s suits are dismissed or it loses in court, what then?
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The following are some hypothetical solutions that Redbox could implement to cope with having a large percentage of the major studios’ titles denied to it for 30-45 days after release.
Price Increase
The most obvious solution would be for Redbox to increase its price from the current $1 per night. A doubling to $2 per night would still undercut most traditional rental stores, but would it be enough of an increase to offset losses from higher cost-of-goods, not to mention possible customer attrition?
Business as Usual
In this scenario, Redbox does nothing to change its model besides being compelled to buy a much larger percentage of its titles at retail rather than from studio distributors. Whether Redbox’s margins are sufficient to absorb such an increase is not known. According to financial analyst Eric Wold, such a scenario, while painful, could ultimately be borne by the company.
Crowdsourcing
This is an interesting idea that has actually been proposed by some commenters at TechDirt.com. As Redbox may have difficulty obtaining a sufficient number of new release titles from retail stores, it could turn to consumers to make up the difference. In addition to the usual army of employees armed with corporate credit cards buying new release titles, Redbox could offer to compensate consumers (with possibly an additional incentive) to send in their freshly bought DVDs.
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While obviously slower and more costly than Redbox’s previous model, this solution could provide a potentially limitless source of titles. As with the previous scenario, it is contingent on Redbox having sufficient margins to afford it. Additionally, this solution could further anger studios and provoke some legal repercussions from them, whether justifiable or not.
Redbox Makes a Deal with One or More Major Retailers
This solution was proposed a few weeks back by the aforementioned analyst Eric Wold. The idea is that Redbox could come to an agreement with Walmart, Target or another major retailer to purchase large quantities of new release titles at a discount. As Walmart alone currently accounts for more than a third of DVD sales in this country, the theory is that the studios would be powerless to do anything to counter such a deal.
Redbox Dies
Now we arrive at the WORST case scenario. After losing its legal fight, its investors’ confidence and finding itself without the resources to cope with new release starvation, the company ceases to exist as we know it. Whether this means bankruptcy and eventual oblivion or a morph in to another type of content provider is uncertain. This scenario seems unlikely, but is not outside the realm of possibility.
What do you think, Insiders? Should things go sour in the Redbox legal drama, can the company survive, and if so, how will they do it? Let us know which, if any, of the above scenarios is likely, or if you have other ideas for how they can stay afloat.
I don’t have the time to comment but I’d just want to compliment Shane on the good job he is doing writing for InsideRedBox.com. I like how he always stays on top of all news and brings us the essence of what is relevant. He also has exemplary English language skills and a witty pen (err, keyboard). Thank you, Shane, for your insightful and entertaining articles, and keep them coming!
P.S. I do not know Shane or anything about him, nor am I associated with the website or anything like that.
What about the scenario of Redbox just only carrying releases that are at least 30 days old? I would think it would get hard to buy ALL their DVDs on the day of release if it came to that.
Or have different prices, $2 for new releases, $1 if 30 days old.
And free codes work for all!!! 8D
That would definately be a nightmare, it is interesting enough to purchase one or two titles.
The movies I rent are the ones that weren’t worth $8 a ticket to see on the big screen (the vast majority of movies made). I wouldn’t pay $4 for those movies when they come to the Big B later either. Even with new releases in the theater I wait until the second week so I can enjoy the best seats in the house with no annoying crowd. So I would have no problem waiting another 30 days for a dvd release to get a movie that’s really only worth $1.
I would never pay $2.00 for one night. It’s wrong to say that still undercuts competitors, and leave it at that. Because the truth is they already charge MORE than their competitors, the only difference is the per night rentals. So $2.00 is more than outrageous for one night. I would go back to regular rental stores.
I think the best option would be making deals with retailers. It’s the only good option in my eyes and, honestly, it’s not a bad one at all. If I were them I would consider doing that already rather than going through all the drama with the studios.
Any type of prolonged wait or price increase will cause me to do business elsewhere.
seriously man – how many times do you watch that movie? do you really need a 5 night rental?
Obviously Redbox wants what we want. To get the most titles and maintain the low cost. Any deviance from that will probably result in less rentals. I also agree with them making a deal with like Walmart to get titles that way. I would never give into an unfair agreement with studios to have to wait 30 or 45 days and watch the competition get the business. I say no to raising prices until basically they can’t afford it anymore. I know if they were to increase pricing I would rent way less, not because I am cheap, but because the lower quality “B” movies would not be worth it anymore. Also I don’t have much extra month. I also think the public needs to be educated on treating discs better. It seems insane to me that discs are only rented an average of 15 times. This site posted that the other month. That is crazy low. There is no need to let you kids touch a disc or for anyone to touch it’s surface, just the edges. Perhaps if people weren’t so horrible to the product it would last longer and for more rentals to keep costs down. I have never scratched one disc in my entire life. Last year I sold over 300 discs (was getting rid of DVD for Blu-ray) to a pawn shop and their jaws dropped in shock that all my discs were like new. Is it really so hard for people to treat things nicely?
I totally agree with you on pretty much everything you said. Yes, the ideal thing to do would be to make a deal with Walmart. And, yes I do believe it would cause alot of people, not just you and I to rent less. The economy sucks right now. No one really has any extra at the end of the month. That is why RED BOX rocks. But, sometimes things happen that no one really has much control over. The big movie execs. grow greedier every day. They see RED BOX for what it is. COMPETITION! It kills them to know that someone else is making money and they can’t get their greedy hands on any of it. As for people taking care of the dvd’s better, I totally agree! Nothing makes me quite as mad as renting a movie, watching two- thirds of it then, it starts freezing and skipping. I have a 9 year old son. He has been taught how to handle dvd’s. All parents could teach their children this. I think the problem is that alot of parents today rely on their T.V. too much as a babysitter. The kids do their own thing with dvd’s and some parents simply don’t care because they have $1 in the movie and, they are taking it back tomorrow. Maybe that’s one way RED BOX could cut on cost. Charge for ruined discs. It would be kinda hard to determine exactly who ruined it but, where there’s a will, there’s a way. Good Luck RED BOX! You are awesome.
P.S. Even if you did have to raise prices, I believe people would still rent from you. Maybe not as much but, they would definatley be there.
$2 a night still sounds better than $4 to me that’s what Blockbuster and Hollywood Video charge where I live.
Don’t recall Hollywood Video’s pricing as they’ve been gone for a few years hereabouts, but isn’t Blockbuster pricing for 5 days at a time…? And isn’t a rental only about 6 or 7 bucks for that 5 days? IMHO that’s close enough to a buck a night. Don’t see the issue here, or is it just me?
The issue is that I usually just have time for 1 or 2 movies and I get them back in 1 to 2 days….so I just spent $2 on 1 movie.
I dont need 5 days …its wasting $3
Not arguing – most times I rent a movie it gets watched that night and returned he next day; that being said there’s plenty of times I’ve held onto a movie for one more day. I just don’t understand how keeping a Blockbuster movie full term vs keeping a Redbox movie for the same amount of time works out to be appreciably different in cost – which seems to be the sticking point for these folks. I guess the question is, people who rent from Blockbuster pay (let’s say) $7 for a five day rental – do they keep it the five days or return it early and waste the money?
Actually, it’s around $4.50, and it’s for seven days. But you don’t get any additional charges until 14 days.
In my area, the only options that haven’t already been shut down are Movie gallery and Blockbuster. The redbox vending company is a juggernaut– It’s been growing exponentially since its emergence and every day more and more people are turning to its high convenience and low prices.
These last chain stores charge more money, but for longer periods of time– The longer rental period keeps paperwork to a minimum and allows customers more time to return the movies. I don’t believe that anyone out there takes longer than one or two days to watch the movie they chose– It’s more of a grace period to avoid late fees, and conflicts that would develop with customers. This allows them to charge by the day– and thus eliminates that “grace period.”
This is where the playing field becomes uneven, because the conventional rental stores cannot compete with the price, or the convenience. THAT is the issue.
EDIT:
These last chain stores charge more money, but for longer periods of time– The longer rental period keeps paperwork to a minimum and allows customers more time to return the movies. I don’t believe that anyone out there takes longer than one or two days to watch the movie they chose– It’s more of a grace period to avoid late fees, and conflicts that would develop with customers.
Redbox avoids these conflicts by making credit cards the only payment method available to customers. This allows them to charge by the day– and thus eliminates that “grace period.”
(My hands were faster then my brain… lolz…)
I like the charge by day because movies are returned in a timely manner, it seems like blockbuster will rent a particular movie out and then not get it back for a week.
AT my store it’s $ 3.49 for 5 days or $2.00 for 1 day. Cost of rent employees insurance that all adds up, but I think it’s a fair price.
Redbox should try to make a deal with goozex… you can pick up dvd movies there cheap.. there is even a way to get the movies even cheaper..
ie
buy the most tokens 120 for 60 = 50 cents per token
i can find games that fetch 800 points in stores for 15 bucks… so i take those 800 pts pick up 8 100 pt movies so i got 8 movies for 15 bucks so less then 2.00 each i got dvds with cases…
even most new release are like 250 so 3 that is still only 5 bucks for new releases to own.. (then you got to figure in shipping) but its something they could think of
If I had to wait 30 days past a movies release in order get from red box, I really wouldn’t see it as too much of a big deal. For a buck I can wait another month. Who knows what they’ll do though?
Redbox can only survive if they change their business model.
That likely means raising prices.
The have the software in place to do that right now.
I expect they will try to survive the onslaught until the new year but once they see the numbers coming in and how bad they look, the prices will rise.
Investors will not be happy to see a growing company “suddenly” become unprofitable once they have to play on a level playing field.
Increased prices and new deals with the studios (rev share, destroy used product) are their only hope.
That your prediction or your hope? Are you thinking if you repeat it so many times the rest of us will believe it?
I love the redbox, but if worse comes to worse, I’m going with netflix.
Redbox will never be my only source of DVDs since they don’t carry all movies or TV shows. But they will continue to be one of my sources no matter what.
Oh, I see you can rate comments now by thumbs up or down. Somebody gave me a thumbs down for stating a simple fact. Uh oh, I better not do that anymore. Boo to facts.
Right now the $1.00 price point is critical for redbox for further expansion in the number of boxes and increasing their customer base. We need to continue to pass the word to people who have yet to try the redbox and there are large segments of the population who has not. The retail discount solution seems to be the best right now, with redbox asorbing some extra costs for a period of time. Lets face it, we aren’t renting these dvds with cash. I put all of my rentals on a credit card, not debit as it is easier to deal with Credit card fraud then debit card, its just a personal choice. An incremental price increase of say 10 to 25 cents, would be psychologically less of a challenge than say $2.00 per rental. I personally would pay $2.00 but probably would rent less, because at that point Netflix is starting to look a little better. Ultimately, I am still waiting for the technology to catch up where we can download rentals for $1 or so direct to our TVs without all the hoops and limited content you have to deal with now. I stopped buying DVDS for the most part in 2004, because I found it rare that I watched a movie more than once.
Well if it goes up to two dollars. I will not be going to redbox for most of the rentals. Because I go there because of most movies are not that great and not really worth paying much more then that to watch. I checked out netflex and will go to them. It is online watch lots of movies with no wait and they send ones in the mail. It only runs 9.99 a mo. plus tax. Not bad for a month. Of unlimited rentals online. Yes it is cheeper then other rental stores out there. But the way jobs are going and acc. is going. Some are on tight bugets and cut where they can for entertainment for the family. But still have it there. :)
I would think that making a deal with the major retailers would be a very good idea. I don’t mind waiting to see a movie so the 30 days would not be problem and I don’t need more than the one day to view it.
I really like RedBox and the idea of just being able to shop and get the movies right there in the store. I usually return them to an outside Red Box, which is so quiek.
Thank you for having the opportunity to get movies for only $1. a day and having them close to me. I hope you win the law suit, I am behind you all the way.
Personally,
I could care less if I had to wait 30 days for the new release. My husband and I make Redbox night a “fun night” with popcorn and beer. The most affordable date night possible. Please don’t jack up the prices!
Why aren’t the studios giving netflix as hard a time? Do they(the studios) have some kind of financial partnership with Netflix? I owned a large mom & pop video store for almost twenty years & the studios always gave great deals to the bigger chains & the super stores & just about ignored the mom & pop video stores. I hated having to explain to my customers why a super store could sell a dvd cheaper than I could buy it from my distributor. It never sat well with me. The rental business has supported the studios & helped make them rich for over 25 years. If I still owned a video store, I’d only charge $1.00 per nite too. It just makes sense in this economy. The studios, the larger rental chains & the super stores are just plain greedy & couldn’t care less who they put out of business.
Even $2 a night is cheaper than anywhere else. I would probably get more of the older ones from my library to offset the increased cost though…
Just hear me out. If you waited a couple of months to see that movie on DVD because you did not want to spend 10$ at a theater, just wait 30 more days and wacht it for a dollar $$$. Redbox should not worry, i will stick behind them. I will wait 30 more days for that new DVD. No biggie
When I got DVD’s from http://e-play.com they did not have the “bar code”type thing that Redbox movies have. e-play apparently has th ability to identify a disk. E-play claims to buy movies and games. I haven’t tried selling any DVD’s yet but a technology like this would allow Redbox to buy movies from consumers.
Do you guys remember when Walmart used to have drink machines in front of almost all of their stores where they sold Coke and Pepsi products for .50-.75. each? Eventually those drinks went from to $1.25-$1.50 each. Even the Sam’s Choice drinks that sold for .35 to .45 disappeared. Now if you want to buy a cold drink you have to pay the higher price even at Walmart. You can buy a large 2liter size of the same beverage off the shelf for less than $1.00. Walmart saw where they could maximize their profits by charging the going rate for those same vending products and make more money. If they can figure out a way to replicate what Redbox is doing then i wouldn’t be surprised to see those red boxes go away in the near future. It’s all about making money right?
People would empty the Pepsi machines in bulk, carting off with hundreds of cans so you could never get one anyway. I assume they had outlets or other machines where they could sell them for full price.
It was nice while it lasted but people always figure a way to exploit a good thing.
What they should have done to be friendlier is set up a booth where the greeter could serve drinks in a cup to customers. You could even have samples of food to try out. Companies would probably pay to have their food displayed in front like that and it would offset the cost of the greeter and the soda.
We are looking at an archaic system the studios want to keep promoting. Red Box is the WalMart of the DVD rentals. RB is changing the way movies are rented and distributed. The studios are in for the money and want to use the same distribution model of yesteryear. Hopefully, RB wins.
NOT A FAN OF REDBOX, BUT THIS IS REDICULOUS!!!!
Redbox Sued for Alleged Late Fees
By : Erik Gruenwedel | Posted: 27 Oct 2009
egruenwedel@questex.com
An Illinois woman has filed a class action lawsuit alleging that kiosk operator Redbox has reaped more than $100 million in illegal and punitive late fees.
Plaintiff Laurie Piechur, who filed the action Oct. 21 in the Circuit Court for the Twentieth Judicial Circuit of St. Clair County, claims Redbox boasts $1-per-day DVD movie rentals “with no late fees … ever,” but then charges consumers a late fee if the movie is returned “even one minute late.”
The complaint alleges that Redbox, which is owned by Coinstar Inc., has earned millions in illegal fees since launching in 2002. In addition, Piechur says the $25 fee charged by Redbox to consumers who keep a rental beyond 24 days is excessive and “far in excess” of what a new DVD actually costs at retail.
The plaintiff, who said she rented frequently within the last 12 months of the date of the complaint, cited excessive and illegal late fees for two rentals: 27 Dresses from 20th Century Fox Home Entertainment and Fool’s Gold from Warner Home Video.
The seven-count complaint (alleging unfair and deceptive business practices, unjust enrichment, and violation of Illinois rental-purchase agreements, among others) seeks $50,000 in damages per count in addition to attorney and related legal fees.
A Redbox representative was not immediately available for comment.
Another example of frivolous lawsuits that should never see the light of day.
She should be held accountable for any legal bills Redbox should encounter.
Can she read?
Did she contact Redbox about the additional day charge when she was only a few minutes late in returning the movie? My experience has shown Redbox’s willingness to work with their customers.
Speaking of Coinstar, that was really a neat idea, especially when it first started. But there was just this problem with the 9% processing fee. In some instances it my have been worth it to not have to roll all those coins. Of course when some credit unions (and i would imagine some banks) started offering this service at no charge, i’m sure the Coinstar machines became a lot less attractive to a lot of people. Does anyone know how much revenue the coin counting machines are generating as opposed to Redbox?
“A Redbox representative was not immediately available for comment”… because of uncontrollable laughter.
She had 2 late fees, and is seeking $350k + legal fees? What an idiot.
Oh, and @Joe: “REDICULOUS”…. pun intended?
YES!
Waiting a few weeks for new releases would not matter a bit to me. Also I would think it would save Redbox money since the new releases would cost less a month later!
Agree. I’d rather wait a few weeks for a new release dvd to come to Redbox so the cost stays low to Redbox and that savings continues to the consumer by keeping their $1 rental price.
Something must have gone in to affect! Where is Battlestar Galactica: The Plan ?
Anyone… ? I’ve tried to find somewhere on the net where it mentions something about why RedBox doesn’t have this… can’t find it…. ?
SO, did sometin happen
It is available for rent at most B&M video rental stores. Make the trip and enjoy the movie.
I was hoping to find “BG: The Plan”, but I really didn’t expect them to have it. Redbox didn’t carry the last two Futurama movies or the Dead Like Me movie; they seem to be passing on most TV-related content.
Analyst: ‘Trigger Day’ Looms for Paramount, Redbox
By : Erik Gruenwedel | Posted: 29 Oct 2009
egruenwedel@questex.com
The long-term viability of Redbox will bear increased scrutiny in the coming weeks as at least one major studio decides whether to continue distributing titles to the $1-per-day movie DVD rental kiosk operator or opts out to pursue growing industry support for a “sales-only” window, according to an analyst.
Merriman Curhan Ford financial analyst Eric Wold said he believes Paramount Home Entertainment will by Dec. 15 decide whether to extend or opt out distributing new release DVDs via Redbox.
Paramount, whose three titles, Transformers: Revenge of the Fallen, G.I. Joe: The Rise of Cobra and Star Trek, rank among the top fourth quarter home entertainment releases, in August signed a five-year distribution deal with Redbox that calls for the kiosk operator to pay the studio $575 million in revenue through 2014.
Warner Home Video, Universal Studios Home Entertainment and 20th Century Fox Home Entertainment have collectively delayed distributing new releases to kiosks until at least 28 days after street date.
Sony Pictures Home Entertainment and Lionsgate have separate distribution deals with Redbox.
“We believe investors will be watching for that decision closely given that Paramount will have a significant level of information on rental trends and sales information at its fingertips ahead of time,” Wold wrote in a note. “Clearly, if Paramount believes that Redbox is negatively impacting sales trends and/or not positively impacting overall home video revenues, then they are unlikely to extend the deal.”
Paramount has the fifth-largest market share in the home video rental industry, with 10.6% of industry rental revenues during 2008 and 9.9% through the first half of 2009, according to Rentrak.
Indeed, Rob Moore, vice chairman of Paramount Pictures, recently reiterated the studio would carefully analyze kiosk distribution’s impact on its “overall revenue profile.”
As kiosks and Redbox, in particular, remain in the crosshairs, there is increased industry buzz about studios and rentailers, including Netflix and Blockbuster, hammering out a new release hierarchy spearheaded by a “sales only” window.
Reed Hastings, co-founder and CEO of Netflix, said he would be amenable to such an arrangement provided the economics (license fees and/or revenue sharing) were appealing, and studios appear to be listening.
“The studios might try to implement something like this to increase demand for sales,” SNL Kagan analyst Wade Holden told the Los Angeles Times.
Then again, the First Sale Doctrine allows that consumers of legally purchased intellectual property, including DVDs, have the right to resell them. It is exactly this provision in the law that has Redbox reportedly negotiating with Wal-Mart as a potential source for DVDs from Warner, Fox and Universal.
“Nothing would stop Netflix from renting titles under First Sale, other than the risk of losing the discount,” said Fred von Lohmann, senior staff attorney with the Electronic Frontier Foundation.
Lohmann said the value of new releases in the first two weeks can’t be understated, as they represent the bulk of kiosk’s appeal and revenue.
“If Redbox had to buy at Wal-Mart and truck titles to the kiosks, that slows down their process and reduces margins,” he said. “They can do it, but probably would rather not.”
For me, this is Napster all over again. Granted, with Napster the music companies got nothing, but now the movie studios are falling into the same trap. They can’t believe their monopoly (cash cow) is dissapearing, and rather than embrace, and figure out how to monetize, they sue. All things change, ride it or die!