Redbox
Encyclopedia
Redbox is an American
company that specializes in the rental of DVD
s, Blu-ray Disc
s, and video games via automated retail
kiosks. As of the end of June 2011, Redbox had over 33,000 kiosks in over 27,800 locations.
Kiosks feature the company's signature red color and arched top surface, visible in the corporate logo, and are located across the United States at grocery store
s, pharmacies
, mass retailers, convenience store
s, and fast food
restaurants.
A subsidiary
of Coinstar Inc.
, Redbox had 34.5% market share of discs rented, as of Q2 2011, as stated by the NPD Group
.
LLC was initially funded by McDonald's Corp. In 2002, the company placed four automated convenience store kiosks, that sold grocery items such as milk, eggs, and sandwiches, and 11 DVD rental kiosks in Washington Metropolitan Area
locations. While Redbox withdrew the grocery kiosks within a year, the DVD-rental kiosks it had also installed in the area succeeded, and the company changed its focus to that market. In 2005, Coinstar
bought 47 percent of the company for $32 million. In early 2008, Coinstar exercised an option to increase its share from 47% to 51%. In February 2009, Coinstar paid McDonald’s and other shareholders between $169 and $176 million for the remainder of the company.
The company passed Blockbuster in 2007 in number of U.S. locations, passed 100 million rentals in February 2008, and passed 1 billion rentals in September 2010. Competitors include Netflix
, Blockbuster (Dish Network), and Blockbuster Express (NCR)
. As of Q2 2011, kiosks currently have 36 percent of the disc rental market, with 38 percent to rent-by-mail services and 25 percent to traditional stores, according to the NPD Group
. As of Q2 2011, 68 percent of the U.S. population lives within a five-minute drive of a Redbox kiosk.
Mitch Lowe joined Redbox in 2003 after spending 5-years as a co-founder of Netflix. At Redbox, he started first as a consultant and then as VP of Purchasing & Operations. In 2005, he became the Chief Operating Officer
of Redbox. Lowe had experimented in 1982 with a short-lived VHS
movie vending company named Video Droid. Mitch Lowe was named President of Redbox in April 2009.
In July 2010, Redbox announced that they were beginning to rent Blu-ray
movies at 13,000 kiosks nationwide, and Blu-ray
was available across the Redbox network by the fall of 2010. In October 2010, the company began testing video game rentals in Reno, Nevada
; Orlando, Florida
; Stevens Point, Wisconsin
; Austin, Texas
; Wilmington, North Carolina
and Corvallis, Oregon
. In June 2011, Redbox launched video game rentals nationwide. Games for all major platforms are offered, including Wii
, PlayStation 3
, and Xbox 360
.
Redbox began in 2004, using re-branded kiosks manufactured and operated by Silicon Valley
-based DVDPlay, at 140 McDonald's restaurants in their Denver and other test markets.
In April 2005, Redbox phased out the DVDPlay-manufactured machines and contracted Solectron
—a subsidiary of Flextronics
, which also manufactures the Zune
, Xbox
and Xbox 360
—to create and manufacture a custom kiosk design.
The company's typical self-service vending kiosk combines an interactive touch screen and sign. It uses a robotic disk array system containing a stacked carousel of DVDs and web-linked electronic communications. Kiosks can be located indoors or out and can hold more than 600 DVDs with 70–200 titles, updated weekly. The kiosks are built as modules, and in areas with higher sales figures, a second machine can be connected to the first one in order to offer a wider selection. The customer pays with a credit card or debit card. DVDs can be returned the next day to any of the company's kiosks; charges accrue up to 25 days, after which the customer then owns the DVD (without the original case) and rental charges cease. Customers can also reserve DVDs online, made possible by real-time inventory updates on the company's website. While customers can buy used DVDs from the kiosks (with unsold used DVDs returned to suppliers), Redbox estimates only 1% to 3% of the company's revenue comes from used disc sales.
A Redbox kiosk rents its average DVD 15 times at an average of $2 per transaction plus any applicable taxes.
, Warner Bros.
and Universal Studios
, separately refused to sell DVDs to Redbox until at least 28 days after their arrival in stores. Since Redbox’s business model relies upon new releases, and Fox and Warner Bros. represented 62 percent of home video rental revenue in 2008–09, analysts have said that this “windowing” of new releases by the three studios may make Redbox’s business model unviable.
Redbox responded by filing lawsuits, first, against Universal in October 2008, then against 20th Century Fox and Warner Bros. in August 2009. In these lawsuits, Redbox has asserted three claims against the studios: copyright misuse, tortious interference
and antitrust claims. In August 2009, the federal judge hearing the Universal case rejected the first two claims, but allowed the antitrust claim to continue. While the judge found sufficient merit in the antitrust claim to allow the case to continue, some independent observers doubt it can succeed, since Redbox "must show that the studios worked together as a cartel... There is little evidence of an industrywide conspiracy." In October 2009, 20th Century Fox and Warner Bros. filed motions to dismiss Redbox's lawsuits against them, with Fox arguing that "antitrust law does not require a seller to provide its product through the distribution channel that the buyer demands, on the date that the buyer demands, or at the price that the buyer demands," and Warner Bros. saying that "This is precisely the type of routine business dispute, motivated solely by a merchant’s attempt to protect its profits rather than to protect competition, that the antitrust laws are not meant to address."
Other major studios, Sony Pictures, Paramount Pictures
and Lionsgate, signed distribution deals with Redbox. The Walt Disney Company
permits third-party distributors to sell to Redbox, but has not entered into a direct relationship with the company. Both sides of the studio lawsuits have pointed to these revenue-sharing deals to shore up their argument, with Redbox President Mitch Lowe saying "our growth can lead to theirs [the studios' growth]. For example, Redbox currently estimates we will pay more than a combined $1 billion over the next five years to Sony, Lionsgate and Paramount to purchase and then rent new release DVDs to consumers," while Warner Bros. says the deals are proof that far from being shut out by Hollywood, "Redbox’s business has thrived since its suit against Universal, underscored by lucrative distribution deals with Paramount Home Entertainment, Sony Pictures Home Entertainment and Lionsgate."
Redbox entered into an agreement with Warner on February 16, 2010, followed by Universal and Fox on April 22 of the year. In the agreements, which settle Redbox's lawsuits, Redbox agreed to not make available for rental films from these studios until 28 days after their initial home video releases. Redbox also improved their ability to make available Blu-ray Disc releases from the studio parties.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
company that specializes in the rental of DVD
DVD
A DVD is an optical disc storage media format, invented and developed by Philips, Sony, Toshiba, and Panasonic in 1995. DVDs offer higher storage capacity than Compact Discs while having the same dimensions....
s, Blu-ray Disc
Blu-ray Disc
Blu-ray Disc is an optical disc storage medium designed to supersede the DVD format. The plastic disc is 120 mm in diameter and 1.2 mm thick, the same size as DVDs and CDs. Blu-ray Discs contain 25 GB per layer, with dual layer discs being the norm for feature-length video discs...
s, and video games via automated retail
Automated Retail
Automated retail is the category of self-service, standalone kiosks in heavily trafficked establishments such as airports, malls and resorts....
kiosks. As of the end of June 2011, Redbox had over 33,000 kiosks in over 27,800 locations.
Kiosks feature the company's signature red color and arched top surface, visible in the corporate logo, and are located across the United States at grocery store
Grocery store
A grocery store is a store that retails food. A grocer, the owner of a grocery store, stocks different kinds of foods from assorted places and cultures, and sells these "groceries" to customers. Large grocery stores that stock products other than food, such as clothing or household items, are...
s, pharmacies
Pharmacy
Pharmacy is the health profession that links the health sciences with the chemical sciences and it is charged with ensuring the safe and effective use of pharmaceutical drugs...
, mass retailers, convenience store
Convenience store
A convenience store, corner store, corner shop, commonly called a bodega in Spanish-speaking areas of the United States, is a small store or shop in a built up area that stocks a range of everyday items such as groceries, toiletries, alcoholic and soft drinks, and may also offer money order and...
s, and fast food
Fast food
Fast food is the term given to food that can be prepared and served very quickly. While any meal with low preparation time can be considered to be fast food, typically the term refers to food sold in a restaurant or store with preheated or precooked ingredients, and served to the customer in a...
restaurants.
A subsidiary
Subsidiary
A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a...
of Coinstar Inc.
Coinstar
Coinstar, Inc. is an American company.The firm's original focus was the conversion of loose change into paper currency, donations or gift cards via coin counter kiosks...
, Redbox had 34.5% market share of discs rented, as of Q2 2011, as stated by the NPD Group
NPD Group
The NPD Group, Inc. is a leading North American market research company. The NPD Group consistently ranks among the top 25 market research companies in the independent Honomichl Top 50 report, which the media and the research industry acknowledge as a credible source of information on the market...
.
History
Redbox Automated RetailAutomated Retail
Automated retail is the category of self-service, standalone kiosks in heavily trafficked establishments such as airports, malls and resorts....
LLC was initially funded by McDonald's Corp. In 2002, the company placed four automated convenience store kiosks, that sold grocery items such as milk, eggs, and sandwiches, and 11 DVD rental kiosks in Washington Metropolitan Area
Washington Metropolitan Area
The Washington Metropolitan Area is the metropolitan area centered on Washington, D.C., the capital of the United States. The area includes all of the federal district and parts of the U.S...
locations. While Redbox withdrew the grocery kiosks within a year, the DVD-rental kiosks it had also installed in the area succeeded, and the company changed its focus to that market. In 2005, Coinstar
Coinstar
Coinstar, Inc. is an American company.The firm's original focus was the conversion of loose change into paper currency, donations or gift cards via coin counter kiosks...
bought 47 percent of the company for $32 million. In early 2008, Coinstar exercised an option to increase its share from 47% to 51%. In February 2009, Coinstar paid McDonald’s and other shareholders between $169 and $176 million for the remainder of the company.
The company passed Blockbuster in 2007 in number of U.S. locations, passed 100 million rentals in February 2008, and passed 1 billion rentals in September 2010. Competitors include Netflix
Netflix
Netflix, Inc., is an American provider of on-demand internet streaming media in the United States, Canada, and Latin America and flat rate DVD-by-mail in the United States. The company was established in 1997 and is headquartered in Los Gatos, California...
, Blockbuster (Dish Network), and Blockbuster Express (NCR)
NCR Corporation
NCR Corporation is an American technology company specializing in kiosk products for the retail, financial, travel, healthcare, food service, entertainment, gaming and public sector industries. Its main products are self-service kiosks, point-of-sale terminals, automated teller machines, check...
. As of Q2 2011, kiosks currently have 36 percent of the disc rental market, with 38 percent to rent-by-mail services and 25 percent to traditional stores, according to the NPD Group
NPD Group
The NPD Group, Inc. is a leading North American market research company. The NPD Group consistently ranks among the top 25 market research companies in the independent Honomichl Top 50 report, which the media and the research industry acknowledge as a credible source of information on the market...
. As of Q2 2011, 68 percent of the U.S. population lives within a five-minute drive of a Redbox kiosk.
Mitch Lowe joined Redbox in 2003 after spending 5-years as a co-founder of Netflix. At Redbox, he started first as a consultant and then as VP of Purchasing & Operations. In 2005, he became the Chief Operating Officer
Chief operating officer
A Chief Operating Officer or Director of Operations can be one of the highest-ranking executives in an organization and comprises part of the "C-Suite"...
of Redbox. Lowe had experimented in 1982 with a short-lived VHS
VHS
The Video Home System is a consumer-level analog recording videocassette standard developed by Victor Company of Japan ....
movie vending company named Video Droid. Mitch Lowe was named President of Redbox in April 2009.
In July 2010, Redbox announced that they were beginning to rent Blu-ray
Blu-ray Disc
Blu-ray Disc is an optical disc storage medium designed to supersede the DVD format. The plastic disc is 120 mm in diameter and 1.2 mm thick, the same size as DVDs and CDs. Blu-ray Discs contain 25 GB per layer, with dual layer discs being the norm for feature-length video discs...
movies at 13,000 kiosks nationwide, and Blu-ray
Blu-ray Disc
Blu-ray Disc is an optical disc storage medium designed to supersede the DVD format. The plastic disc is 120 mm in diameter and 1.2 mm thick, the same size as DVDs and CDs. Blu-ray Discs contain 25 GB per layer, with dual layer discs being the norm for feature-length video discs...
was available across the Redbox network by the fall of 2010. In October 2010, the company began testing video game rentals in Reno, Nevada
Reno, Nevada
Reno is the county seat of Washoe County, Nevada, United States. The city has a population of about 220,500 and is the most populous Nevada city outside of the Las Vegas metropolitan area...
; Orlando, Florida
Orlando, Florida
Orlando is a city in the central region of the U.S. state of Florida. It is the county seat of Orange County, and the center of the Greater Orlando metropolitan area. According to the 2010 US Census, the city had a population of 238,300, making Orlando the 79th largest city in the United States...
; Stevens Point, Wisconsin
Stevens Point, Wisconsin
Stevens Point is the county seat of Portage County, Wisconsin, United States. Located in the central part of the state, it is the largest city in the county, with a population of 24,551 at the 2000 census...
; Austin, Texas
Austin, Texas
Austin is the capital city of the U.S. state of :Texas and the seat of Travis County. Located in Central Texas on the eastern edge of the American Southwest, it is the fourth-largest city in Texas and the 14th most populous city in the United States. It was the third-fastest-growing large city in...
; Wilmington, North Carolina
Wilmington, North Carolina
Wilmington is a port city in and is the county seat of New Hanover County, North Carolina, United States. The population is 106,476 according to the 2010 Census, making it the eighth most populous city in the state of North Carolina...
and Corvallis, Oregon
Corvallis, Oregon
Corvallis is a city located in central western Oregon, United States. It is the county seat of Benton County and the principal city of the Corvallis, Oregon Metropolitan Statistical Area, which encompasses all of Benton County. As of the 2010 United States Census, the population was 54,462....
. In June 2011, Redbox launched video game rentals nationwide. Games for all major platforms are offered, including Wii
Wii
The Wii is a home video game console released by Nintendo on November 19, 2006. As a seventh-generation console, the Wii primarily competes with Microsoft's Xbox 360 and Sony's PlayStation 3. Nintendo states that its console targets a broader demographic than that of the two others...
, PlayStation 3
PlayStation 3
The is the third home video game console produced by Sony Computer Entertainment and the successor to the PlayStation 2 as part of the PlayStation series. The PlayStation 3 competes with Microsoft's Xbox 360 and Nintendo's Wii as part of the seventh generation of video game consoles...
, and Xbox 360
Xbox 360
The Xbox 360 is the second video game console produced by Microsoft and the successor to the Xbox. The Xbox 360 competes with Sony's PlayStation 3 and Nintendo's Wii as part of the seventh generation of video game consoles...
.
Kiosk design and operation
Silicon Valley
Silicon Valley is a term which refers to the southern part of the San Francisco Bay Area in Northern California in the United States. The region is home to many of the world's largest technology corporations...
-based DVDPlay, at 140 McDonald's restaurants in their Denver and other test markets.
In April 2005, Redbox phased out the DVDPlay-manufactured machines and contracted Solectron
Solectron
Solectron Corporation was a global electronics manufacturing company for original equipment manufacturers . It pioneered the electronics manufacturing services industry in 1977 and was a leader in the field...
—a subsidiary of Flextronics
Flextronics
Flextronics International Ltd. is an electronics manufacturing services provider that offers services to original equipment manufacturers . It also provides supporting supply chain services, including packaging and transportation throughout the world, as well as design and after-sales...
, which also manufactures the Zune
Zune
Zune is a digital media brand owned by Microsoft which includes a line of portable media players, a digital media player software for Windows machines, a music subscription service known as a 'Zune Music Pass', music and video streaming for the Xbox 360 via the Zune Software, music, TV and movie...
, Xbox
Xbox
The Xbox is a sixth-generation video game console manufactured by Microsoft. It was released on November 15, 2001 in North America, February 22, 2002 in Japan, and March 14, 2002 in Australia and Europe and is the predecessor to the Xbox 360. It was Microsoft's first foray into the gaming console...
and Xbox 360
Xbox 360
The Xbox 360 is the second video game console produced by Microsoft and the successor to the Xbox. The Xbox 360 competes with Sony's PlayStation 3 and Nintendo's Wii as part of the seventh generation of video game consoles...
—to create and manufacture a custom kiosk design.
The company's typical self-service vending kiosk combines an interactive touch screen and sign. It uses a robotic disk array system containing a stacked carousel of DVDs and web-linked electronic communications. Kiosks can be located indoors or out and can hold more than 600 DVDs with 70–200 titles, updated weekly. The kiosks are built as modules, and in areas with higher sales figures, a second machine can be connected to the first one in order to offer a wider selection. The customer pays with a credit card or debit card. DVDs can be returned the next day to any of the company's kiosks; charges accrue up to 25 days, after which the customer then owns the DVD (without the original case) and rental charges cease. Customers can also reserve DVDs online, made possible by real-time inventory updates on the company's website. While customers can buy used DVDs from the kiosks (with unsold used DVDs returned to suppliers), Redbox estimates only 1% to 3% of the company's revenue comes from used disc sales.
A Redbox kiosk rents its average DVD 15 times at an average of $2 per transaction plus any applicable taxes.
Movie studio lawsuits
With growing concern in 2009 that DVD kiosks may jeopardize DVD sales and rentals, three major movie studios, 20th Century Fox20th Century Fox
Twentieth Century Fox Film Corporation — also known as 20th Century Fox, or simply 20th or Fox — is one of the six major American film studios...
, Warner Bros.
Warner Bros.
Warner Bros. Entertainment, Inc., also known as Warner Bros. Pictures or simply Warner Bros. , is an American producer of film and television entertainment.One of the major film studios, it is a subsidiary of Time Warner, with its headquarters in Burbank,...
and Universal Studios
Universal Studios
Universal Pictures , a subsidiary of NBCUniversal, is one of the six major movie studios....
, separately refused to sell DVDs to Redbox until at least 28 days after their arrival in stores. Since Redbox’s business model relies upon new releases, and Fox and Warner Bros. represented 62 percent of home video rental revenue in 2008–09, analysts have said that this “windowing” of new releases by the three studios may make Redbox’s business model unviable.
Redbox responded by filing lawsuits, first, against Universal in October 2008, then against 20th Century Fox and Warner Bros. in August 2009. In these lawsuits, Redbox has asserted three claims against the studios: copyright misuse, tortious interference
Tortious interference
Tortious interference, also known as intentional interference with contractual relations, in the common law of tort, occurs when a person intentionally damages the plaintiff's contractual or other business relationships...
and antitrust claims. In August 2009, the federal judge hearing the Universal case rejected the first two claims, but allowed the antitrust claim to continue. While the judge found sufficient merit in the antitrust claim to allow the case to continue, some independent observers doubt it can succeed, since Redbox "must show that the studios worked together as a cartel... There is little evidence of an industrywide conspiracy." In October 2009, 20th Century Fox and Warner Bros. filed motions to dismiss Redbox's lawsuits against them, with Fox arguing that "antitrust law does not require a seller to provide its product through the distribution channel that the buyer demands, on the date that the buyer demands, or at the price that the buyer demands," and Warner Bros. saying that "This is precisely the type of routine business dispute, motivated solely by a merchant’s attempt to protect its profits rather than to protect competition, that the antitrust laws are not meant to address."
Other major studios, Sony Pictures, Paramount Pictures
Paramount Pictures
Paramount Pictures Corporation is an American film production and distribution company, located at 5555 Melrose Avenue in Hollywood. Founded in 1912 and currently owned by media conglomerate Viacom, it is America's oldest existing film studio; it is also the last major film studio still...
and Lionsgate, signed distribution deals with Redbox. The Walt Disney Company
The Walt Disney Company
The Walt Disney Company is the largest media conglomerate in the world in terms of revenue. Founded on October 16, 1923, by Walt and Roy Disney as the Disney Brothers Cartoon Studio, Walt Disney Productions established itself as a leader in the American animation industry before diversifying into...
permits third-party distributors to sell to Redbox, but has not entered into a direct relationship with the company. Both sides of the studio lawsuits have pointed to these revenue-sharing deals to shore up their argument, with Redbox President Mitch Lowe saying "our growth can lead to theirs [the studios' growth]. For example, Redbox currently estimates we will pay more than a combined $1 billion over the next five years to Sony, Lionsgate and Paramount to purchase and then rent new release DVDs to consumers," while Warner Bros. says the deals are proof that far from being shut out by Hollywood, "Redbox’s business has thrived since its suit against Universal, underscored by lucrative distribution deals with Paramount Home Entertainment, Sony Pictures Home Entertainment and Lionsgate."
Redbox entered into an agreement with Warner on February 16, 2010, followed by Universal and Fox on April 22 of the year. In the agreements, which settle Redbox's lawsuits, Redbox agreed to not make available for rental films from these studios until 28 days after their initial home video releases. Redbox also improved their ability to make available Blu-ray Disc releases from the studio parties.