RedBox Rental

If you happened to read through some of my past movie reviews, you may have noticed I rent movies from a local RedBox. What exactly is the RedBox? The RedBox is a DVD kiosk placed in a wide variety of locations throughout the United States allowing customers to rent newly released movies for one night at a charge of $1 plus tax. You can also rent movies online and choose your closest RedBox location and all you have to do is show up, swipe your credit card, and off you go. The return time currently is 9pm the following day. Depending on when you rent and pick up your movie, you can actually have more than 24 total hours to watch the movie. Sounds like a pretty good deal doesn’t it? It is a very good deal!

Through the years, I have been through all the incarnations of movie rental. When I was a young kid, my family began by renting a VCR and movies from a local video store. Yes, back then, you could actually rent the player because the technology was just taking root. You could purchase memberships to local video clubs which allowed you to easily rent movies and enjoy whatever movie you wanted to watch at that time without having to own a complete library. Video stores popped up everywhere. The ability to rent a movie and bring it home was a major advance in entertainment because during that period of time, cable television was not everywhere, satellite television was in its infant stages and for the most part, people only had a few channels available to watch. Video rental was an entire new arena for home entertainment, and affordable.

Over the years, DVD took over as the format of choice for video format and rental. Laserdisc was in there but it quickly died. Thousands of “brick and mortar” stores arrived in the version of large retail chains and mom and pop stores. Hollywood Video, Blockbuster, Movie Gallery, and many others appeared in most every town, sometimes two or three. Along with the physical movie rental businesses, the online movie rental business eventually appeared. Netflix and Blockbuster are two of the most well known. Wal-Mart tried to enter the arena but chose to outsource their product to one of the established online rental companies. So here we are, 25-30 years after the appearance of VHS and the business of renting movies.

At this point, renting movies is a commodity and there is very little profit margin in renting a movie. The brick and mortar stores have long since been under pressure and their ability to turn profits has basically been disappearing. The mom and pop video rental stores have long since disappeared and left only the large rental chain companies. Even the large chains have realized their time is limited. Renting a movie has become far too simple and easy and there are limited additional services they can provide outside of renting movies from their stores. People still want to rent movies though, the question is, how are they going to do it?

With the internet reaching almost every household and high-speed internet reaching more and more of our society, eventually rentals of movies will take place via the internet and delivered via bits and bytes to the persons home and stored on a hard drive for viewing. We are currently in a transition. We still need the physical disk rental sites in the meantime to allow for home entertainment. Storage may not even be an option in the future as streaming video may be the rental of choice. But, that’s the future, where are we now? This is where the RedBox comes into play. People are creatures of habit and they are always looking for ways to save time. What happens if we place a kiosk of newly released movies at business sites where people frequent on a regular basis? On top of that, make the price appealing and create a product with ease of use in mind. That is the RedBox.

Most people may notice the RedBox kiosks at their local McDonald’s. However, Wal-Mart has recently signed an agreement to place these kiosks in nearly every one of their stores. Wal-Mart and McDonald’s are two of the most trafficked businesses in our communities. That is a great target for their product. No longer do you have to have a membership to a store or make a special trip to the video store. No longer do you have to wonder if the video is available because you can check and rent online. The process is so simple and easy. While you are out and about eating or shopping, stop by the kiosk, pick out a few movies, swipe your card and off you go. You can’t get any simpler than that.

Well, the online rental companies seem to be easier don’t they? Maybe easier in the fact that the movies show up in your mail, but not as cheap. I was a member of the online rental companies for a while and overall, it was a great experience. However, there was no way I could rent enough movies to make the price of the movie $1 plus 6-10 cents in tax over the month due to the membership fees. At the RedBox, EVERY movie is $1 whether you rent 1 or 30. The RedBox has the ease of use of online rental plus the fact that it’s cheaper. How can you beat that? If the online company cannot beat that model, how can the brick and mortar companies beat it? They have to pay costs ranging from employee salaries to building leases to utility bills. How can any competing movie rental business possibly compete with the RedBox model?

They can’t. Over the near future, the brick and mortar video rental companies will have to alter their business plans and you have seen some of them already doing so. They have a brand name established so that’s a plus. These companies need to find new services to offer which will replace their losses in store video rental and membership fees. To quote some numbers from VideoBusiness.com, for the 12 month period starting in June 2006, 11 million movies were rented from RedBox locations. With the arrival of thousands more RedBox kiosks throughout the country, that number has been far exceeded now. The simplistic nature of the kiosk has completely revamped how physical video rental is done at this time. Of course, it will eventually be replaced by other forms of delivery removing the physical nature, but currently, it is the best video rental business model available.

I’m sure there are other product lines where new business models can effectively change their entire market. Can you think of any potential methodology changes resulting in cheaper prices and also create time savings for the consumers involved? Think about where people spend the majority of their time and I’m sure there is something in that model that can be changed to become more efficient. How do you think most service companies get off the ground? They find an issue in a consumer’s life and exploit the issue by saving the consumer time and effectively charging less. Valvoline anyone?