5 ms·

Study: Redbox Will Destroy the Entertainment Industry

16 points by adamhowell 17y ago

protomyth 17y ago
from the article: It should be noted that LAEDC’s mission is to “attract, retain and grow businesses and jobs for the regions of L.A. County,” so it has an agenda.
kp212 17y ago
I understand DVD sales from retail outlets being harmed. However, I've always wondered why rentals get harmed, doesn't Redbox have to follow the same channels as Netflix, Blockbuster and pay for DVD's that are rented? I've always wondered how the rental portion of the market in terms of revenues works.
- pyre 17y ago
  I don't work for Redbox so I don't know for sure, but I'm speculating that they maybe using the Krispy Kreme model (i.e. their growth is based on expansion). In other words, since they keep opening up new kiosks they can move product that is not selling well in one kiosk to another new kiosk, rather than it being a sunk cost if they buy product for an area and it doesn't end up selling well. At some point, they may end up collapsing in on themselves if they are not able to raise their prices to account for such write-offs (as their expansion slows). Though my theories could just be hot air since I neither work for them nor am I an MBA (or an economics major at that). I know that they are looking to raise prices: http://www.insideredbox.com/redbox-begins-testing-higher-rental-prices/ http://www.insideredbox.com/redbox-begins-testing-higher-ren... Blockbuster is trying to compete with kiosks too: http://paidcontent.org/article/419-blockbuster-adds-dvd-vending-kiosks-50-machine-pilot-redbox/ http://paidcontent.org/article/419-blockbuster-adds-dvd-vend...
- philwelch 17y ago
  Right now, there are two ways to "own" a movie: 1. Buy the DVD. 2. Rent the DVD and rip it onto your hard drive. Selling is more lucrative than renting for some of the same reasons that renting is better than buying: selling happens at a higher cost and the end consumer gets a physically fragile disc instead of a readily backupable set of data. We're talking orders of magnitude here: the movie industry could sell a DVD to you, or they could sell it to Netflix or Redbox, in which case at least dozens of people can rip a copy. Thanks to first-sale doctrine, Hollywood can't even price-discriminate against Netflix or Redbox. To recoup their losses, Hollywood would have to charge Netflix maybe $200 for a $20 DVD. First sale allows Netflix to buy the same shrinkwrapped DVD for $25 from whoever bought it from Hollywood in the first place. Even if Hollywood clamps down contracts against all the possible mass distributors, end customers could play arbitrage on DVD's. Netflix would probably even mail you the empty envelope to do it in. Obviously, as more people choose door number 2 over door number 1, the movie industry's DVD revenues will diminish significantly. That's the threat of Redbox: whenever you push down the threshold of renting a movie, especially to a psychologically insignificant level, you make it more and more likely that "buying a movie" will drop down that order of magnitude. Blockbuster and Netflix have psychologically high barriers of entry: you have to sign contracts, carry around a card, drive to the store, pay for a monthly membership, or otherwise make some sort of commitment. Redbox? You put four quarters in the machine and you get a movie for life if you can run Handbrake. That's the same cost and the same level of commitment it takes to do your laundry, minus having to carry around laundry.
nym 17y ago
I had a terrible experience with Redbox, I liked the idea of avoiding the teenagers at Blockbuster, but when I rented a movie it was unplayable because it was scratched beyond repair. I suppose I could have contacted their customer service reps, but at the price of a rental vs. my time it just didn't make sense. On the other hand, I wish I had shares in their company.
- idoh 17y ago
  No need to wish, they are part of a publicly traded company, cstr (Redbox is owned by Coinstar). http://www.google.com/finance?client=ob&q=NASDAQ:CSTR http://www.google.com/finance?client=ob&q=NASDAQ:CSTR
  - jfarmer 17y ago
    Which is also one of those "Why didn't I think of it?" companies. Coinstar makes machines you dump your change into and, for a percent of the transaction, prints out paper bills. Free money! You build the machine, give the store a percent of the cut, and every (non-premium) store will let you put one of those up front. They're in every Safeway I've ever been in. I'd expect to see them in Wal-Marts, Targets, etc. too.
    - me2i81 17y ago
      It has to pay the store well enough to cover the cost of the Safeway manager standing in front of the machine, scratching his head when it jams up.
      - philwelch 17y ago
        Really? Vending machines, pay phones, and coin-op laundry machines are all the same business model, and typically, that business model involves the owner of wherever the thing is installed calling the owner/operator of the machine when it breaks down instead of fixing it yourself. My landlord knows nothing about fixing the washer and dryer in my apartment building, that much is for sure. All the head-scratching should probably boil down to "put an out of order sign on it and call Coinstar" at worst.
deleted 17y ago
[deleted]
anigbrowl 17y ago
I don't really see why...$1/rental is cheap but then if you watch a lot of movies Netflix is arguably cheaper (and has a vastly better selection). I think they ought to be more worried about movie downloads for a monthly flat rate.
gfodor 17y ago
Study: On-demand instant HD movie streaming will destroy Redbox.
- kierank 17y ago
  "Acquiring Rights" for DVD rentals is vastly easier than getting the streaming rights to HD content.
  - philwelch 17y ago
    As you can tell by comparing the Netflix DVD library to the Netflix streaming library. And that's with all the money and influence of Netflix, plus a strategic partnership with Starz (which itself has clout).
ryanwaggoner 17y ago
I think Redbox is part of a bigger trend: automation will destroy tons of service jobs and "hurt" a lot of established industries in the process. Blockbuster/Redbox is a good example. I can replace a 5000 sq ft store and 10 employees with a kiosk that takes up a few sq ft. Selection might not be as good, but it's good enough for most people. Or take your typical restaurant. There's almost no reason that 95% of the waitstaff couldn't be replaced by ordering kiosks at each table. It would reduce errors and reduce costs. Or what about convenience stores? Figure out which items make up 90% of your sales, put them in an automated kiosk and put one on every street corner. You're now selling almost as much (or maybe even more) with dramatically lower costs. I think it's a good thing overall, but there will definitely be some big losers economically from such a dramatic shift.
- apsurd 17y ago
  Good thought analysis, but in general, there will always be people willing to pay to be waited on (in your restaurant example). If anything it would be more accurate to say fast-food workers would be most in trouble. Being a waiter is a skilled job afterall =)
  - ryanwaggoner 17y ago
    There may always be those people, but convenience and price win over personal service. Example: Wal-Mart.
    - ardit33 17y ago
      if it was for price people wouldn't go at a restaurant, but just buy the cooked food and eat it home. Most non-cheap restaurant ($12 per meal and over) will just not automate. Think about it, you can get your coke/cola from a vending machine and it has been like that for ages, but you are still not able to get the beer/fancy drink. Even if sometimes they can be rude, a bartender is part of the experience.
      - apsurd 17y ago
zackattack 17y ago
Redbox = dvd for big screen and instantly accessible to the mainstream customer. It has already crossed the chas. When everyone has set top boxes it will be obsolete. But that is not happening for a long time.
JulianMorrison 17y ago
I realized yesterday, DVDs take the piss. A hand-span of plastic to store less data than you could fit on a micro-SD the size of your fingernail. This is an obsolete medium. I wonder how soon the general public will see it?

16 points by adamhowell 17y ago

from the article: It should be noted that LAEDC’s mission is to “attract, retain and grow businesses and jobs for the regions of L.A. County,” so it has an agenda.

kp212 17y ago

I understand DVD sales from retail outlets being harmed. However, I've always wondered why rentals get harmed, doesn't Redbox have to follow the same channels as Netflix, Blockbuster and pay for DVD's that are rented? I've always wondered how the rental portion of the market in terms of revenues works.

pyre 17y ago
I don't work for Redbox so I don't know for sure, but I'm speculating that they maybe using the Krispy Kreme model (i.e. their growth is based on expansion). In other words, since they keep opening up new kiosks they can move product that is not selling well in one kiosk to another new kiosk, rather than it being a sunk cost if they buy product for an area and it doesn't end up selling well. At some point, they may end up collapsing in on themselves if they are not able to raise their prices to account for such write-offs (as their expansion slows). Though my theories could just be hot air since I neither work for them nor am I an MBA (or an economics major at that). I know that they are looking to raise prices: http://www.insideredbox.com/redbox-begins-testing-higher-rental-prices/ http://www.insideredbox.com/redbox-begins-testing-higher-ren... Blockbuster is trying to compete with kiosks too: http://paidcontent.org/article/419-blockbuster-adds-dvd-vending-kiosks-50-machine-pilot-redbox/ http://paidcontent.org/article/419-blockbuster-adds-dvd-vend...
philwelch 17y ago
Right now, there are two ways to "own" a movie: 1. Buy the DVD. 2. Rent the DVD and rip it onto your hard drive. Selling is more lucrative than renting for some of the same reasons that renting is better than buying: selling happens at a higher cost and the end consumer gets a physically fragile disc instead of a readily backupable set of data. We're talking orders of magnitude here: the movie industry could sell a DVD to you, or they could sell it to Netflix or Redbox, in which case at least dozens of people can rip a copy. Thanks to first-sale doctrine, Hollywood can't even price-discriminate against Netflix or Redbox. To recoup their losses, Hollywood would have to charge Netflix maybe $200 for a $20 DVD. First sale allows Netflix to buy the same shrinkwrapped DVD for $25 from whoever bought it from Hollywood in the first place. Even if Hollywood clamps down contracts against all the possible mass distributors, end customers could play arbitrage on DVD's. Netflix would probably even mail you the empty envelope to do it in. Obviously, as more people choose door number 2 over door number 1, the movie industry's DVD revenues will diminish significantly. That's the threat of Redbox: whenever you push down the threshold of renting a movie, especially to a psychologically insignificant level, you make it more and more likely that "buying a movie" will drop down that order of magnitude. Blockbuster and Netflix have psychologically high barriers of entry: you have to sign contracts, carry around a card, drive to the store, pay for a monthly membership, or otherwise make some sort of commitment. Redbox? You put four quarters in the machine and you get a movie for life if you can run Handbrake. That's the same cost and the same level of commitment it takes to do your laundry, minus having to carry around laundry.

nym 17y ago

I had a terrible experience with Redbox, I liked the idea of avoiding the teenagers at Blockbuster, but when I rented a movie it was unplayable because it was scratched beyond repair. I suppose I could have contacted their customer service reps, but at the price of a rental vs. my time it just didn't make sense. On the other hand, I wish I had shares in their company.

idoh 17y ago
No need to wish, they are part of a publicly traded company, cstr (Redbox is owned by Coinstar). http://www.google.com/finance?client=ob&q=NASDAQ:CSTR http://www.google.com/finance?client=ob&q=NASDAQ:CSTR
- jfarmer 17y ago
  Which is also one of those "Why didn't I think of it?" companies. Coinstar makes machines you dump your change into and, for a percent of the transaction, prints out paper bills. Free money! You build the machine, give the store a percent of the cut, and every (non-premium) store will let you put one of those up front. They're in every Safeway I've ever been in. I'd expect to see them in Wal-Marts, Targets, etc. too.
  - me2i81 17y ago
    It has to pay the store well enough to cover the cost of the Safeway manager standing in front of the machine, scratching his head when it jams up.
    - philwelch 17y ago
      Really? Vending machines, pay phones, and coin-op laundry machines are all the same business model, and typically, that business model involves the owner of wherever the thing is installed calling the owner/operator of the machine when it breaks down instead of fixing it yourself. My landlord knows nothing about fixing the washer and dryer in my apartment building, that much is for sure. All the head-scratching should probably boil down to "put an out of order sign on it and call Coinstar" at worst.

deleted 17y ago

[deleted]

anigbrowl 17y ago

I don't really see why...$1/rental is cheap but then if you watch a lot of movies Netflix is arguably cheaper (and has a vastly better selection). I think they ought to be more worried about movie downloads for a monthly flat rate.

gfodor 17y ago

Study: On-demand instant HD movie streaming will destroy Redbox.

kierank 17y ago
"Acquiring Rights" for DVD rentals is vastly easier than getting the streaming rights to HD content.
- philwelch 17y ago
  As you can tell by comparing the Netflix DVD library to the Netflix streaming library. And that's with all the money and influence of Netflix, plus a strategic partnership with Starz (which itself has clout).

ryanwaggoner 17y ago

I think Redbox is part of a bigger trend: automation will destroy tons of service jobs and "hurt" a lot of established industries in the process. Blockbuster/Redbox is a good example. I can replace a 5000 sq ft store and 10 employees with a kiosk that takes up a few sq ft. Selection might not be as good, but it's good enough for most people. Or take your typical restaurant. There's almost no reason that 95% of the waitstaff couldn't be replaced by ordering kiosks at each table. It would reduce errors and reduce costs. Or what about convenience stores? Figure out which items make up 90% of your sales, put them in an automated kiosk and put one on every street corner. You're now selling almost as much (or maybe even more) with dramatically lower costs. I think it's a good thing overall, but there will definitely be some big losers economically from such a dramatic shift.

apsurd 17y ago
Good thought analysis, but in general, there will always be people willing to pay to be waited on (in your restaurant example). If anything it would be more accurate to say fast-food workers would be most in trouble. Being a waiter is a skilled job afterall =)
- ryanwaggoner 17y ago
  There may always be those people, but convenience and price win over personal service. Example: Wal-Mart.
  - ardit33 17y ago
    if it was for price people wouldn't go at a restaurant, but just buy the cooked food and eat it home. Most non-cheap restaurant ($12 per meal and over) will just not automate. Think about it, you can get your coke/cola from a vending machine and it has been like that for ages, but you are still not able to get the beer/fancy drink. Even if sometimes they can be rude, a bartender is part of the experience.
    - apsurd 17y ago

zackattack 17y ago

Redbox = dvd for big screen and instantly accessible to the mainstream customer. It has already crossed the chas. When everyone has set top boxes it will be obsolete. But that is not happening for a long time.

JulianMorrison 17y ago

I realized yesterday, DVDs take the piss. A hand-span of plastic to store less data than you could fit on a micro-SD the size of your fingernail. This is an obsolete medium. I wonder how soon the general public will see it?