Top 10 Film Industry Stories of 2010: #6

Studios to Redbox/Netflix: You'll Wait a Month and You'll Like It

By David Mumpower

January 27, 2011

Call me crazy, but I think I'll go with the one that's not double or triple the price.

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2010 represented a series of huge events for Redbox. The unique vending machines have all but destroyed conventional video stores such Hollywood Video and Blockbuster. In fact, the latter chain was forced to file for bankruptcy late in the year with the end of their days seemingly nigh. With the news of major competition near collapse, Redbox seems like 2010 was a perfect year for them, but one contract dispute they experienced garnered our attention more than the rest.

We should point out that 2010 was a banner year on the whole for Redbox. The company vended their billionth rental in September, an amazing feat. Then, they expanded their presence by including Blu-Ray titles for rental for a relatively modest charge of $1.50 relative to the dollar people have come to expect for DVD rentals. Similarly, a videogame distribution system was also revealed. For the same cost as a Blu-Ray, i.e. twice as much as a regular video, people can rent the latest videogame titles as well. That’s only about 25% of the cost of most major competitors, although their lending practices ordinarily involve five to seven days rather than just one.

Redbox also announced an intention to take on their major remaining competitor, Netflix. Recognizing that the future of the industry is through streaming and digital downloads, Redbox has determined that they must prevent Netflix’s current dominance in this market from becoming a permanent monopoly. Whether they are too late remains to be seen. For that matter, details of the plan were not revealed in October as previously indicated. The reason for this is presumably that Redbox has little online presence at the moment. Going from none to Netflix challenger is quite a big step. The beauty of Redbox in its current format is ease of use. Anyone with a major credit card and the ability to intuit a vending machine, something they should have learned in childhood, can rent movies. Creating an online account then utilizing Redbox rather than Netflix to peruse and rent movies is an entirely different step. But tracking their development in this regard is a Film Industry Story for a later year.




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Keeping in mind the underlying competition between Netflix and Redbox, the 2010 issue that captivated us was Redbox’s willingness to swallow new and unfair rental terms from several major movie studios. On January 6, 2010, Warner Bros. and Netflix came to an agreement wherein the latter party would be instituting a 28 day waiting period for video rentals in exchange for a larger catalog of streaming titles from the studio.

The reason for this was explained as follows. DVD sales were deplorable for two major reasons. The first is that the back catalog of DVD titles was largely depleted, leaving new releases as the primary source of DVD sales revenue. If people used their rental plans from Netflix or vended a title from Redbox, they were statistically much less likely to purchase the DVD. The second is that the economy had crashed, creating a more cautious style of consumer spending. Even purchases as modest as DVDs were called into question. With the studios in desperate need of a scapegoat for flagging sales, they turned to Redbox and Netflix and painted them as the enemy.


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