Movie Studios See a Threat in Growth of Redbox(nytimes.com)
nytimes.com
Movie Studios See a Threat in Growth of Redbox
http://www.nytimes.com/2009/09/07/business/media/07redbox.html
12 comments
These machines were everywhere in France several years ago. I remember commenting that I was exceptionally disturbed that the French had more innovation in movie rentals than virtually anywhere else. I first noticed one of these machines in a newly opened Wal-Mart this year, hadn't seen one before in Canada.
It's taking so long in Canada to get these new rental means set up, there's little wonder why the RIAA and MPAA are calling Canada a home for piracy. It's the only way to get a movie without paying like $7 to Blockbuster for a half-decent rental time. I've got the choice of constantly running to blockbuster to rent and return a single movie that it's going to end up costing more in gas than to rent the damn thing, because god knows blockbuster never heard of a convenient location.
It's taking so long in Canada to get these new rental means set up, there's little wonder why the RIAA and MPAA are calling Canada a home for piracy. It's the only way to get a movie without paying like $7 to Blockbuster for a half-decent rental time. I've got the choice of constantly running to blockbuster to rent and return a single movie that it's going to end up costing more in gas than to rent the damn thing, because god knows blockbuster never heard of a convenient location.
I absolutely agree. Netflix and RedBox are both nothing more than elaborate "hacks" around how restrictive studios are about licensing content to be streamed over the Internet. Its really great to see how these two models are making studios squirm; hopefully it turns up the pressure so they'll just stream content over the web.
Strangely written article. For example:
"The $1 price is not the main issue for the studios, although they do not like that, either; it is the timing. New DVDs sell for about $25. Video-on-demand services price them at about $5. Multiday rentals of new titles cost $4.99 at Blockbuster.
Now there is a $1 option at the same time. That could put downward pressure on the industry’s price structure."
In other words, the $1 price is the main issue.
"The $1 price is not the main issue for the studios, although they do not like that, either; it is the timing. New DVDs sell for about $25. Video-on-demand services price them at about $5. Multiday rentals of new titles cost $4.99 at Blockbuster.
Now there is a $1 option at the same time. That could put downward pressure on the industry’s price structure."
In other words, the $1 price is the main issue.
> In other words, the $1 price is the main issue.
Not so.
Movies are priced based on how early you get to see it. If you are willing to wait, the price goes down.
Redbox prices them at $1 without making you wait [as much], which moves the entire chain of time/price balances.
Not so.
Movies are priced based on how early you get to see it. If you are willing to wait, the price goes down.
Redbox prices them at $1 without making you wait [as much], which moves the entire chain of time/price balances.
This is correct. And this is how studios structure their deals with move theater owners. The studios take a greater cut in the first week(s) and that cut declines over time. Having cheap alternatives available at any time, especially early in relative terms, stings them. The whole pricing structure is, IMHO, silent collusion. It's maximizes their profit as long as they don't get disrupted. When they do get disrupted, they fight back, as is the case here, and it's the case with the health care industry, politicians, lobbyists, and any other member of the status quo, but now I'm ranting!
There are other factors at play also. Redbox is actually $1 per day. Keep it longer, pay more, all the way up-to the price of the DVD, in which case you just keep it. And probably more significantly, they can only hold a very limited supply: someone takes out that new release, it's out, and your options are then go online or another box hoping to find it, guess when the person that got it out will return it, opt for another movie, or, pay a higher price with another vendor to avoid these pitfalls.
Let me ask you a question, then: if Redbox were pricing rentals at $10, would the industry have a problem with them? No? How about $5? No?
It's the price.
It's the price.
I think there is probably a gold mine of ideas in things that failed 20/30 years ago. Sometimes things just aren't ready, even though they're really good ideas.
I love this and wished that it was here in my country. A dollar is cheap even from where I am at.
Here, you can buy pirated DVDs on the sidewalks for a dollar (USD). If there were Redboxes here, people would automatically switch from buying pirated DVDs to Redbox.
FYI, I am from the Philippines and pirated DVDs are so rampant here that they sell it publicly outside schools, and in some malls...
Here, you can buy pirated DVDs on the sidewalks for a dollar (USD). If there were Redboxes here, people would automatically switch from buying pirated DVDs to Redbox.
FYI, I am from the Philippines and pirated DVDs are so rampant here that they sell it publicly outside schools, and in some malls...
same is the case in India, where I am from. I can buy a pirated DVD for twenty rupees (about 40 cents, at 50 rupees a dollar), and if I buy more (5-10) I can get it even more cheaper.
guess what the studios did? they released DVDs, for sale, at about the same price (25 rupees) - not the latest films, but many recent titles.
guess what the studios did? they released DVDs, for sale, at about the same price (25 rupees) - not the latest films, but many recent titles.
So does pricing the DVDs at about the same price help?
Do people buy the legit copies or still prefer the pirated DVDs?
It is not only the pricing but the availability. I think, here (Philippines), people buy pirated DVDs because the distribution is so wide-spread. So if you sell cheap and legit copies and people have to go all the way out to buy, then chances are that they won't.
With Redbox on the other hand, if it is available just around the corner or at least in places with security guards (less likely to be vandalized, etc.), then I'm pretty sure that the ones who sell illegal copies will go out of business in weeks.
With Redbox on the other hand, if it is available just around the corner or at least in places with security guards (less likely to be vandalized, etc.), then I'm pretty sure that the ones who sell illegal copies will go out of business in weeks.
I don't know the exact numbers, but I have seen these low priced DVDs sell like hot cakes, even though the selection was quite limited (around 1.5 years ago, when I was in India, not sure now).
What the studios don't realize is this - they wont lose anything by reducing the prices because a) piracy will come down b) the sheer volume of sales, will make up for the price reduction.
Indian market is supremely price sensitive, so Indian companies aim for volume. The same can and will work in US too, if only the studios have the common sense to try it.
What the studios don't realize is this - they wont lose anything by reducing the prices because a) piracy will come down b) the sheer volume of sales, will make up for the price reduction.
Indian market is supremely price sensitive, so Indian companies aim for volume. The same can and will work in US too, if only the studios have the common sense to try it.
Since the movie studios only release slightly older movies (3 months or so after release), the piracy market has changed so that only the latest movies are pirated and are normally of low quality. Also, a lot of the pirated movie DVDs are compilations, stuff like 3 movies-in-one or multiple movies of an actor.
This is valid mostly for regional movies. Legit English DVDs of popular movies from western studios are sold for around 600-700 rupees (around 15 dollars), so the market for pirated copies of such movies is pretty large.
This is valid mostly for regional movies. Legit English DVDs of popular movies from western studios are sold for around 600-700 rupees (around 15 dollars), so the market for pirated copies of such movies is pretty large.
I think DVDs in Bangladesh (last time I went) were about a dollar as well. And they're just as rampant as in the Philippines. So I have to wonder, why would Redbox be any more popular than pirated discs? Same price, one is ownership and one is rental.
> Here, you can buy pirated DVDs on the sidewalks for a dollar (USD). If there were Redboxes here, people would automatically switch from buying pirated DVDs to Redbox.
It seems like Hollywood prefers that we pirate new releases.
It seems like Hollywood prefers that we pirate new releases.
I wonder if this would do well in Japan. You'd have to give the boxes cell integration since credit card penetration isn't that high here, but other than that it should work fantastically. Just put them within a block of the train stations and you'll do so much business you'll have to figure out some way to restock them for the first few weeks until you reach equilibrium.
This is a fascinating article. It will be a Harvard Business School case study. Even though it's not about online businesses, everyone should read it top to bottom.
Brilliant PR hit - it both tells you about the company and makes you feel like they're fighting for you.
They call the 'Mom n Pop' model the opposite of revenue sharing, but many 'Mom n Pop' stores do revenue sharing.
One thing that they fail to mention is that part of Red Box's success is due to their expansion. It allows them to shift product that isn't renting well in a particular area to new kiosks. This helps them to: a) pay less for new product in new kiosks and b) not be forced to either trash the existing product to replace it with other titles or let it sit there not earning back any money for them. There are lots of examples of companies built on expansion that ran out of steam... Krispy Kreme for example.
One thing that they fail to mention is that part of Red Box's success is due to their expansion. It allows them to shift product that isn't renting well in a particular area to new kiosks. This helps them to: a) pay less for new product in new kiosks and b) not be forced to either trash the existing product to replace it with other titles or let it sit there not earning back any money for them. There are lots of examples of companies built on expansion that ran out of steam... Krispy Kreme for example.
actually they referred to the "Mom and Pop" model as the opposite of vending machines - the revenue sharing part was independent of the other.
Innocent question: is there anything stopping you from renting a whole bunch of these and ripping them? (aside from your conscience, if that's an issue)
While the thought occurred to me (I have netflix to the mail time is two day round trip) to do that mostly so I could watch the movie while the disk was in the mail, but I quickly realized that occasionally I have a disk for three or four days in a row for a very good reason. I simply didn't have time to watch the movie. If I had ripped it I still wouldn't have watched it, but would now have two movies to watch. In the end I concluded that the ripping them didn't get me anything and in fact was a hassle because it took time and energy to rip the disk (which I am not spending watching the movie means I am doing something more important). When I get free time I watch a movie and return it. I have the two movies at a time plan and I find that on a given week one of the disks will sit on the TV for a day until I get around to watching it. I can't imagine having the three disks plan.
If you really want to collect movies for $300 you can get massive used DVD lots with hundreds of legit movies off ebay for way less hassle.
If you really want to collect movies for $300 you can get massive used DVD lots with hundreds of legit movies off ebay for way less hassle.
How is this even relevant though? You've been able to do the same thing with Netflix, Blockbuster, etc for a long time now. The housemate of an ex-supervisor had a Netflix account and would immediately rip the DVDs he got and send them back (sometimes not even watching them), and this was from 2002 or so.
The dollar value of a rental is, for Lovefilm UK, about 90 cents. Because of this low price, ripping a DVD is MUCH more effort than simply renting it again.
Not if you rip it in your car while sitting in front of the vending machine. This avoids gas and time spent on returns, and worry about watching the video before late fees pile up.
The big industries are so short-sighted. They need to be worrying about Netflix and online delivery.
Analysts also see a threat to studios in Redbox’s practice of selling about half of its DVDs into the used market
I can sell used cars, used couch, used books but I can't sell used DVDs?
Music and movie industry has some of the craziest people in business
I can sell used cars, used couch, used books but I can't sell used DVDs?
Music and movie industry has some of the craziest people in business
A DVD holds its value a lot more value than say, a used mattress.
For example, GameStop sells new xbox & PS3 games for $60, and used for $55. When the consumer buys the used game, the publisher doesn't see any money.
Yes, they're still crazy in general, but this is a legitimate problem when you want to continue selling stuff to customers.
For example, GameStop sells new xbox & PS3 games for $60, and used for $55. When the consumer buys the used game, the publisher doesn't see any money.
Yes, they're still crazy in general, but this is a legitimate problem when you want to continue selling stuff to customers.
This reminds me of a business idea that I had about 3 years ago that was essentially a kiosk for downloading iTunes material. I thought it would be particularly popular at airports.
Wi-fi in new iPod models will eventually make this idea obsolete.
Wi-fi in new iPod models will eventually make this idea obsolete.
Hate to break it to you bud, but the Internet is not choosy about media types. I promise you that when movie streaming becomes more practical, it will destroy these bulky/expensive kiosks as well as other traditional store chains. The time of DVD is slowly approaching its end.