Research Paper on Redbox – a Perspective

Redbox – A Perspective

Abstract

        Redbox is a leader in movie and game disc rentals. Redbox offers rental of new-release Blu-ray, DVD and game disks through its automated self-service vending machine kiosks. Redbox is conveniently located at high traffic shopping locations like leading grocery, drug and convenience stores. The following analysis will focus on the analysis of Redbox business model, journey of Redbox, ventures and its success and failure and the current and future situation.

Background

        Redbox offers movie and game disc rentals through its automated vending machine kiosks. Over a period of time, Redbox became popular for the Blu-ray disc and DVD rentals.  Redbox has started a business model with its automated kiosks, with a strategy to end human interaction in the consumer experience and relies upon new releases. Redbox does not have a physical named store as others; instead it is a giant red box which we see when we walk through a mall, or in a leading grocery and convenience stores. In the age of growing internet users and online streaming-video, Redbox had its try with Redbox Instant, an online video streaming service, but it had to shut down the service due to various issues. I chose the topic to talk about the influence of internet and e-commerce on the business like Redbox and discuss the approach Redbox has taken for the revival of its success facing critical challenges for the continued growth.

Introduction

        In 2002, Redbox was initially financed by McDonald’s Corporation and company located 11 DVD rental kiosks and automated convenient store kiosks with grocery items in Washington Metro Area locations. (Wikipedia, n.d.). With the success of DVD rental kiosks, company shifted its focus to that market. In 2004, first fully-automated DVD rental kiosks were located in Denver area McDonald’s locations and later expanded to other new markets. In 2005, Coinstar, Inc. (now Outerwall, Inc.) made an agreement with McDonald’s and invested in Redbox. Redbox started expanding its footprint into drugstores, major grocery stores, malls, and convenience stores. In 2009, Coinstar took over Redbox. Redbox is currently available at about 35,000 locations.

Analysis

Business Growth

        Redbox has taken a unique competitive approach for its growth. Redbox attracted customers with its new release movie collections, low price rentals, conveniently located just outside the mall or a major grocery store in the neighborhood to rent and return the disks and kiosks equipped with touchscreen which are easy to use and interactive.         Major competitors for Redbox were Blockbuster with its retail outlets and Netflix with its DVD by mail service and online streaming. In 2007, Redbox, with the new business model and strategy, exceeded the number of U.S Blockbuster locations. Redbox continued to dominate the physical DVD and Blu-ray disk rentals.

Challenges of Brick-and-Mortar Business

        The growth of internet users and online shoppers is the biggest challenge to the brick-and-mortar business. Online vendors do not have the cost of renting a store, or other additional charges that a regular brick-and-mortar business has and online vendors offer huge discounts and no sales tax, has attracted a large market share. The popularity of online buying has increased by some extent due to “showrooming” – shoppers examine their products in store, but make purchase online. Additional challenges to the brick-and-mortar business attribute to the availability of merchandise collection in store, continuous monitoring and surveillance of store.

        Due to high competition from Redbox and Netflix, and high cost of the retail outlets, Blockbuster lost significant revenue and filed bankruptcy. According to Hachman, M (January 20, 2012, The ongoing Blockbuster retail store closings and prior year with fewer independent stores has without any doubt made Redbox the major beneficiary of the failing brick-and-mortar rental store business.

Redbox Instant

        Though Redbox was able to benefit from the downfall of Blockbuster store, Netflix remained its major competitor with its online streaming through subscription business. In 2013, Redbox in partnership with Verizon launched the video streaming service Redbox Instant, for online streaming with monthly subscription with about 5000 titles. Redbox Instant service was never able to attract the expected number of customers. With the presence of major competitors like Netflix which dominated the streaming-video market, and its other rivals Amazon’s Prime, Hulu etc., Redbox Instant as a new player in the subscription streaming-video market could not sustain for long. In 2014, Outerwall (previously Coinstar), stated they were “not pleased” with number of Redbox Instant subscriptions. Later in the year, in October 2014, Redbox Instant was officially shut down.