In 1996 the movie rental industry was dead and monopolistic. The Blockbusters and Hollywood Videos of the world ruled the land and consumers were left with either watching movies in the theater or renting them from one of these establishments. In 1997 Netflix broke the barrier and gave consumers a choice. Movie lovers no longer had to worry about late fees or driving to the store or if the movie would be in stock. Netflix changed the movie rental industry and now Redbox, created just six years later, has changed the industry again.
The movie rental industry of 2009 can be broken down into several different segments. In-store rental, online rental, self service rental, or on-demand. In-store rental is comprised of Blockbuster, Hollywood, and other similar businesses. Their appeal stems from customers who don’t want to go to the movie theater, but have a desire to watch a movie at that moment. The convenience of renting from one of these establishments is a premeditated thought process is not necessary. If you want a movie then you drive to the store and if it’s in stock you pick it up and take it home. To adapt to customer’s complaints and suggestions Blockbuster instilled a no-late fee return policy. They adapted again in 2006 creating Blockbuster Total Access an online program that would compete with Netflix. Unfortunately for Blockbuster, and other in-store rental establishments, consumers are not happy with their product. Forums such as I Hate Blockbuster and articles like CNet’s Blockbuster streaming: Too late show it doesn’t matter what your business model is if your customer service sucks. You also run into the factor that many of the top movies are not in stock which completely defeats the purpose of going to the movie store. What’s the point if you can just use one of the alternatives?
Online rental, such as Netflix, was created and instantly gave chills down the industries spine. Not only were late fees a non-factor, but customers didn’t have to leave their house to rent a movie anymore. All you needed was a computer and you could queue up all of your favorite movies to be delivered directly to your door. For busy business people the monthly fee made more sense then potentially forgetting to return a movie and being charge a late fee. Movie addicts had the ability to watch as many movies as they wanted in a month’s time. While Netflix had the reliability of ‘always in stock’ movies they forced customers to have a premeditated, “I want to see this movie at this time,” instead of instantly. You wouldn’t be able to watch Boondock Saints at anytime you wanted to. This downside, once again, left the door open for potential competitors.
On-demand movie rental took advantage of the industry’s weaknesses and exploited them to the fullest degree. Virtually any movie at anytime could be played on your TV with just the click of a button. No computers, no driving, no phone calls, no nothing. All you needed to do was select the movie and accept the charges that would be placed on your credit card bill. Frankly this seemed like a pretty fool-proof business model that couldn’t possibly be beaten. That is until Redbox gained momentum.
Redbox is the new kid on the block, but they haven’t wasted anytime creating buzz. Their product isn’t any different than a Blockbuster or Hollywood, but their pricing system of $1 is much, much different. The machine locations can typically be found in McDonald’s, but also at grocery stores, gas stations, Wallgreens, Walmart, and more. Essentially Redbox enables customers to grab a movie 24/7. Their title selection, while limited in comparison to Netlflix, is current and trendy. For only a $1 you can see Academy Award winning movies and the selection rotates frequently.
What makes Redbox stand out among its competitors is their engagement of social media and Internet marketing. Redbox movies cost $1, but if you sign up for their e-mail or SMS updates you can get a code for a free movie once a week! Another no so publicized site is Inside Redbox . This site is not affiliated with Redbox, but they release free rental codes as often as twice a week. In additional the Insider Redbox keeps users up to date on the latest releases and other great Redbox information.
So how can Redbox possibly make money if they’re giving away free DVD’s twice a week? First, customers have to bring their free DVD back by 9pm the next day or they are charged $1, the normal price, for the rental. Any company that offers a free trial membership or date pending action can make a substantial amount of money on customers who forget to complete all the necessary actions. This is why credit card companies make money. If everyone paid their bill on time or paid the balance they’d go out of business. The other factor is Redbox has an extremely loyal following. If you decide on Thursday that you really want to see a movie, that you know Redbox has, why wouldn’t you go use their services? Customers believe that since Redbox already gave them a free movie on Monday if they pay for one on Thursday they’ve come out even.
Still not convinced it’s a viable business? In February 2009, Coinstar purchased the remaining shares of Redbox from McDonald’s for $175 million, making Coinstar the sole owner.
The movie rental industry continues to remain vulnerable and volatile, but Redbox has added stability. By listening to consumers demands they’ve positioned their brand and business as an industry leader in a few short years. Redbox has the use of social media and Internet marketing to thank for their assent to the top. Redbox, like Zappos, chose to listen and react instead of force their services on consumers. Maybe if Blockbuster listened they wouldn’t find themselves on the outside looking in.