Friday, May 8, 2009

Seeing Red Over Redbox

Apparently the success of Redbox--those ubiquitous $1 DVD rental kiosks in supermarket and chain stores across America--has upset Blockbuster and some movie studios. Redbox was originally owned by McDonald's but now is owned by Coinstar, whose coin-counting kiosks appear in many of the same chain stores.

The industry argument against Redbox goes like this: Who'll buy a DVD or visit a local Blockbuster when they can rent the latest hits from a self-serve kiosk in a nearby supermarket for only $1 per video per night? Yikes.

Now for the consumer view: Redbox is convenient and perfectly positioned for impulse rentals. Its occasional free movie coupons are a nice plus. However, the selection in any given Redbox is very limited.

Customers can reserve a movie to be ready at one of 15,000 local kiosks, but what if they want to watch that night? And if a store closes before customers return their DVD to the Redbox, they have to either return it at another Redbox elsewhere or pay an additional $1 for a second night's rental (returning the DVD when the store is open the next day).

Still, if Redbox can hold the price line at $1, it will continue to make competitors see red, especially because consumers need to pinch pennies in today's economy. Consumers clearly understand the value difference between renting and owning. If they want to buy and keep a movie, they'll do it. If they want to watch once, they'll rent.

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