Redbox Automated Retail, LLC specializes in DVD, Blu-ray, and video game rentals
via automated retail kiosks. As of the end of November 2012, Redbox had over
42,000 kiosks at more than 34,000 locations.
Redbox kiosks feature the company's signature red color and are located at
convenience stores, fast food restaurants, grocery stores, mass
retailers, and pharmacies. The company announced in February 2012 the
deployment of kiosks in Canada to test the Canadian market.In an email on
February 5th, 2015, Redbox announced they would be shutting down their
Canadian operation citing low demand. The last day for rentals in Canada was
February 13, 2015 and the last day for returns was March 5, 2015 when all
Canadian machines were shut off and sent to various stores in the USA.
Redbox had 47.8% market share of the physical rental market, as of Q1 2013,
as stated by the NPD Group. History
Redbox Automated Retail LLC was initially funded by McDonald's
Corporation. In 2002, the company placed four automated convenience store kiosks
that sold grocery items such as milk, eggs, and sandwiches as well as 11
DVD-rental kiosks in Washington Metropolitan Area locations. Redbox
withdrew the grocery kiosks within a year, but the DVD-rental kiosks
succeeded, and the company changed its focus to that market. In 2005, Coinstar
bought 47 percent of the company for $32 million. In early 2008, Coinstar
exercised an option to increase its share from 47% to 51%. In February 2009,
Coinstar paid McDonald’s and other shareholders between $169 and $176
million for the remainder of the company.
The company surpassed Blockbuster in 2007 in number of U.S. locations, passed
100 million rentals in February 2008, and passed 1 billion rentals in
September 2010. Competitors include Netflix and Blockbuster. In Q2 2011,
kiosks accounted for 36 percent of the disc rental market, with 38 percent of
that attributable to rent-by-mail services and 25 percent to traditional
stores, according to the NPD Group. As of Q2 2011, 68 percent of the U.S.
population lives within a five-minute drive of a Redbox kiosk. The numbers for
Q2 2013 shows that the Redbox rentals had surpassed 50 percent of the total
disc rentals in the country. Mitch Lowe joined Redbox in 2003 after
spending five years as a cofounder of Netflix. At Redbox, he started first as
a consultant and then as VP of Purchasing & Operations. In 2005, he
became the Chief Operating Officer of Redbox. Lowe had experimented in 1982
with a short-lived VHS movie vending company named Video Droid. Mitch Lowe
was named President of Redbox in April 2009.
In July 2010, Redbox announced that they were beginning to rent Blu-ray movies at
13,000 kiosks nationwide, and Blu-ray Discs were available across the Redbox
network by the fall of 2010. In October 2010, the company began testing video
game rentals in Reno, Nevada; Orlando, Florida; Stevens Point, Wisconsin;
Austin, Texas; Wilmington, North Carolina; and Corvallis, Oregon. In June
2011, Redbox launched video game rentals nationwide. Games for all major
platforms are offered, including Wii, PlayStation 3, and Xbox 360.
In February 2012, Redbox announced the purchase of former competitor
Blockbuster Express for $100 million. The acquisition included over 10,000 DVD
kiosks, certain retailer contracts, and DVD inventory. As part of the agreement,
Redbox entered a supplier arrangement of purchasing product and services from
NCR. On June 27, 2012, Redbox sent an email to its customers announcing that
it had completed the purchase of Blockbuster Express on June 23.
In 2012, Redbox's founder, Gregg Kaplan, exited Coinstar as president and COO of
Redbox. Anne Saunders became the new president of Redbox.
In July 2013, Redbox announced its 3 billionth rental of a disc, counting
both movies and games. On October 7, 2013, Barry Rosenstein's
hedge fund JANA Partners filed a 13D on shares of Outerwall and has disclosed a
new 13.5% ownership stake in OUTR with 3,777,995 shares. The activist 13D
filing includes that JANA expects to talk with management. In particular,
they want to focus on "a review of strategic alternatives including
exploring a strategic transaction, selling or discontinuing certain
businesses, or pursuing a sale." The founder of the hedge fund Jana Partners
Barry Rosenstein told "Closing Bell", about Redbox, the company is "gushing
with cash". On December 9, 2013, Outerwall cut 8.5% of workforce.
Redbox now offers Xbox One and Playstation 4 games.
Redbox Instant Redbox began internally testing a video
streaming service, dubbed Redbox Instant, in July 2012. The service is a
joint effort between Redbox and Verizon. On March 14, 2013 Redbox Instant by
Verizon officially went public, offering customers a free 1-month trial of an
$8/month unlimited streaming service that includes 4 disc rentals from
kiosks. The service launched with 4,600 titles from movie companies such as
EPIX, Lionsgate, NBCUniversal, Paramount Pictures, Relativity, and Sony Pictures.
According to earlier reports, Redbox Instant was going to allow users to
download content to mobile devices for offline viewing. As of 2014, Redbox does
not yet offer downloads for offline viewing. Redbox titles can be rented or
purchased, in SD or HD quality. When customers rent a title, they have 30
days to begin watching it and then 48 hours to watch it as many times as they
like. In June 2013, Sony made the official
announcement at E3 that Redbox Instant will be available on the PlayStation 4
console, and it was released in late 2013. Android and iOS apps also enable
streaming content on mobile devices. The service disabled sign-ups for new
users in mid 2014 owing to a growing number of criminals using the site to
verify stolen credit cards. In Q2 2014 earning call, Outerwall, Redbox's parent
company, stated that they were "not pleased" with Redbox Instant
subscription numbers. Finally on October 4, 2014, it was announced that
Redbox Instant would be shutting down on October 7, only 19 months after its
initial launch. Kiosk design and operation
Redbox began in 2004, using re-branded kiosks manufactured and operated by
Silicon Valley-based DVDPlay, at 140 McDonald's restaurants in Denver and
other test markets. In April 2005, Redbox phased out the
DVDPlay-manufactured machines and contracted Solectron—a subsidiary of
Flextronics, which also manufactures the Zune, Xbox and Xbox 360—to create and
manufacture a custom kiosk design. The new kiosk was designed by Franz
Kuehnrich at GetAMovie Inc.. It was innovative in that its carousel design
not only decreased the number of robotic movements necessary to dispense and
restock inventory, it also dramatically increased the number of discs that could
be stored within a kiosk. In addition, the software, designed and developed by
Enterprise Logic Systems, was also innovative that it allowed RedBox to
remotely monitor and manage inventory at all kiosks throughout the country.
The company's typical self-service vending kiosk combines an interactive
touch screen and sign. It uses a robotic disk array system containing a stacked
carousel of DVDs and web-linked electronic communications. Kiosks can be
located indoors or out and can hold more than 600 DVDs with 70–200 titles,
updated weekly. The kiosks are built as modules, and in areas with higher sales
figures, a second machine can be connected to the first one in order to
offer a wider selection. The customer pays with a credit card or debit card.
DVDs can be returned the next day to any of the company's kiosks; charges accrue
up to 25 days, after which the customer then owns the DVD and rental charges
cease. Customers can also reserve DVDs online, made possible by real-time
inventory updates on the company's website. While customers can buy used
DVDs from the kiosks, Redbox estimates only 1% to 3% of the company's revenue
comes from used-disc sales. A Redbox kiosk rents its average DVD 15
times at an average of $2 per transaction plus any applicable taxes.
Movie studio lawsuits With growing concern in 2009 that DVD
kiosks might jeopardize movie studio income from DVD sales and rentals, three
major movie studios, 20th Century Fox, Warner Bros., and Universal Studios,
separately refused to sell DVDs to Redbox until at least 28 days after
their arrival in stores. Since Redbox’s business model relies upon new releases,
and Fox and Warner Bros. represented 62 percent of home video rental revenue in
2008–09, analysts have said that this “windowing” of new releases by the three
studios may make Redbox’s business model unviable.
Redbox responded by filing lawsuits, first, against Universal in October
2008, then against 20th Century Fox and Warner Bros. in August 2009. In these
lawsuits, Redbox has asserted three claims against the studios: copyright
misuse, tortious interference, and antitrust claims. In August 2009, the
federal judge hearing the Universal case rejected the first two claims, but
allowed the antitrust claim to continue. While the judge found sufficient merit
in the antitrust claim to allow the case to continue, some independent observers
doubt it can succeed, since Redbox "must show that the studios worked together as
a cartel... There is little evidence of an industrywide conspiracy." In October
2009, 20th Century Fox and Warner Bros. filed motions to dismiss Redbox's
lawsuits against them, with Fox arguing that "antitrust law does not require a
seller to provide its product through the distribution channel that the buyer
demands, on the date that the buyer demands, or at the price that the buyer
demands," and Warner Bros. saying that "This is precisely the type of routine
business dispute, motivated solely by a merchant’s attempt to protect its
profits rather than to protect competition, that the antitrust laws are
not meant to address." Other major studios, Sony Pictures,
Paramount Pictures, and Lionsgate signed distribution deals with Redbox. The Walt
Disney Company permits third-party distributors to sell to Redbox, but has
not entered into a direct relationship with the company. Both sides of the
studio lawsuits have pointed to these revenue-sharing deals to shore up their
argument, with Redbox President Mitch Lowe saying, "our growth can lead to
theirs [the studios' growth]. For example, Redbox currently estimates we
will pay more than a combined $1 billion over the next five years to Sony,
Lionsgate and Paramount to purchase and then rent new-release DVDs to
consumers," while Warner Bros. says the deals are proof that far from being shut
out by Hollywood, "Redbox’s business has thrived since its suit against
Universal, underscored by lucrative distribution deals with Paramount Home
Entertainment, Sony Pictures Home Entertainment, and Lionsgate."
Redbox entered into an agreement with Warner on February 16, 2010, followed by
Universal and Fox on April 22, 2010. In the agreements, which settle Redbox's
lawsuits, Redbox agreed to not make available for rental films from these
studios until 28 days after their initial home-video releases. Redbox also
improved their ability to make available Blu-ray Disc releases from the studio
parties. See also
DVD-by-mail Video rental shop
Redbox Automated Retail LLC v. Universal City Studios LLLP
Redbox Movie Awards References
External links Official website