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? 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.
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.
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. 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.
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.