Wednesday, November 28, 2012

Marketing Movie Rentals: Risk and Reward

With 35,000 bright red kiosks (not to mention 5 million Facebook likes), Redbox virtually rules America's on-the-spot DVD rental business now that Blockbuster has closed its US stores.

Redbox also has a deal with Verizon to offer monthly subscription access to streaming movies. Redbox CEO Paul Davis hints to Fast Company that curated content will be its point of differentiation: "I think there's a point where as consumers, I mean, do you really need 100,000 titles? I mean, really?"

Of course, market dynamics change day to day. When the NPD Group compiled the chart at right, just a few months ago, physical DVD rentals still dominated the market overall. The implication: Redbox should keep plugging in those free-standing kiosks wherever they can. Costly, but convenient for customers.

However, in a survey by ConsumerReports.org conducted a few weeks later, streaming was named the rental method of choice by most respondents, followed by DVD rental and then video-on-demand (VOD). Redbox's Verizon alliance would be critical in this situation.

Disney has tried and failed to gain traction in the streaming segment, one example of the risk in this hotbed of activity.

Netflix has been steadily building a massive library of DVDs and streaming movie content, following the CEO's long-term strategy of "grow membership, increase content, repeat." In other words, Netflix's direction conflicts with the Redbox idea about reaching a point where buyers simply have too many choices. Plus, Netflix lets buyers subscribe to streaming-only content or DVDs-by-mail, as they prefer--at least for now.

Amazon's latest test of monthly pricing for streaming movie content brings the price in line with Netflix's streaming-only subscription price and with Hulu's price. YouTube is testing on-demand rentals (streamed of course). The market is also seeing some experiments like the UK Domino's Pizza/Lionsgate movie rental streaming option being offered to buyers who order pizza.

Where is the market going? Which strategies will pay off? Tune in tomorrow.

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