Redbox Automated Retail LLC is an American company specializing in DVD, Blu-ray, and 4K UHD rentals via automated retail kiosks. Redbox kiosks feature the company's signature red color and are located at convenience stores, fast food restaurants, grocery stores, mass retailers, and pharmacies.
|Galen C. Smith, CEO|
Mitch Lowe, President (2009-11)
Gregg Kaplan, Founder and CEO (2002-09)
|Owner||Apollo Global Management|
Redbox Automated Retail LLC was initially funded by McDonald's Corporation. Originally the kiosks sold a variety of products under the name Ticktok Easy Shop, however in 2003 McDonald's ended its use of the kiosks for these products. Instead, Gregg Kaplan decided to use the kiosks for DVD rentals. The prices of the first rentals varied, until the company landed on the one dollar per day pricing. The price later went up to $1.75. The company also employed a ‘return anywhere’ policy, different from competitors, which allowed consumers to return their rental to any Redbox kiosk, not just the one from which they originally rented the unit. Kiosks rented both films and video games.
In 2002, the company placed four automated convenience store kiosks that sold grocery items such as milk, eggs, and sandwiches as well as 11 DVD-rental kiosks in Washington Metropolitan Area locations. Redbox withdrew the grocery kiosks within a year, but the DVD-rental kiosks succeeded, and the company changed its focus to that market. In 2005, Coinstar bought 47 percent of the company for $32 million, after unsuccessful attempts to sell half the company to Blockbuster and Netflix. 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. While traditional brick and mortar rental stores were closing at a high rate, Redbox moved into existing retail locations such as supermarkets, and placed kiosks within them or outside of them in order to gain that consumer base.
The company surpassed Blockbuster in 2007 in number of U.S. locations, passed 100 million rentals in February 2008, and passed 1 billion rentals in September 2010. Current and former competitors include Netflix, Blockbuster, Movie Gallery and its subsidiary Hollywood Video, West Coast Video and Family Video along with other DVD by mail rental services. In Q2 2011, kiosks accounted for 36 percent of the disc rental market, with 38 percent of that attributable 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 lived within a five-minute drive of a Redbox kiosk. The numbers for Q2 2013 shows that the Redbox rentals had surpassed 50 percent of the total disc rentals in the country.
Mitch Lowe joined Redbox in 2003 after spending five years as an executive at 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. 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 Discs were 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 PlayStation 4, Xbox One, and Nintendo Switch at select locations. In 2019 Redbox confirmed video game rentals would be discontinued.
In February 2012, Redbox announced the purchase of former competitor Blockbuster Express (NCR) for $100 million. The acquisition included over 10,000 DVD kiosks, certain retailer contracts, and DVD inventory. As part of the agreement, Redbox entered a supplier arrangement of purchasing product and services from NCR. On June 27, 2012, Redbox sent an email to its customers announcing that it had completed the purchase of Blockbuster Express on June 23.
The number of items rented from kiosks annually peaked in 2013, with 772.87 million rentals. There were then 717.13 million units rented, and in 2015 the number was 587.55 million, a decline due to the increasing consumer shift from physical media to streaming and other online services. That year the company also moved its 1,400 kiosks in Canada to other locations in the United States. Still, as of 2014, Redbox represented half of the physical media rental market. As of July 2016, Redbox offered Xbox One and PlayStation 4 games.
Throughout most of 2016, former parent company Outerwall was seeking a buyer based on shareholder input. In early September, Outerwall was sold to Apollo Global Management and its three units (Coinstar, ecoATM and Redbox) were split into individual companies. In late September 2016, Outerwall CFO Galen Smith was announced as the new CEO of Redbox. The company had approximately 40,000 kiosks in the United States as of January 2017. The kiosks are shifting around the country to different geographic locations in order to track consumer trends and in reaction to underperforming neighbourhoods. Most locations only have one kiosk, however in some cases there will be more than one to deal with high traffic locales.
The percentage of consumers renting or purchasing movies from Redbox rose in the fourth quarter of 2017 from the third quarter, according to a TiVo survey. In a survey of 3,000 respondents, TiVo found that 12.5% of respondents used Redbox in Q4 compared to about 10% in Q3. The percentage trailed only Amazon (17.9%), which was up 3.3% from Q3. Redbox usage topped iTunes (7.9%), Google Play (7.2%), YouTube Movies (4.8%), Vudu (3.7%), CinemaNow (2.2%), Flixster (1.5%) and other (1.4%).
Redbox began internally testing a video streaming service, dubbed Redbox Instant, in July 2012. The service was a joint effort between Redbox and Verizon. On March 14, 2013 Redbox Instant by Verizon officially went public, offering customers a free 1-month trial of an $8/month unlimited streaming service that includes 4 disc rentals from kiosks ($1 more for Blu-ray). The service launched with 4,600 titles from movie companies such as EPIX, Lionsgate, NBCUniversal, Paramount Pictures, Relativity, and Sony Pictures. According to early reports, Redbox Instant also planned to allow users to download content to mobile devices for offline viewing; titles could be either rented or purchased, in SD or HD quality, with rental customers having 30 days to begin viewing their title and 48 hours of unlimited views thereafter.
In June 2013, Sony made the official announcement at E3 that Redbox Instant would be available on the PlayStation 4 console, and it was released in late 2013. Android and iOS apps also enabled streaming content on mobile devices.
Redbox Instant disabled sign-ups for new users in mid 2014 owing to a growing number of people using the website to verify stolen credit cards. In Q2 2014 earning call, Outerwall, Redbox's parent company, stated that they were "not pleased" with Redbox Instant subscription numbers. Finally on October 4, 2014, it was announced that Redbox Instant would be shutting down on October 7, only 19 months after its initial launch.
Redbox On Demand
On December 13, 2017, Redbox offered a new service called Redbox On Demand. Like Redbox Instant, it is a streaming service, but based on a different model. It does not require any membership, and the list will contain new releases as well as several titles that it is claimed will never be available on services like Netflix.
Kiosk design and operation
Redbox began in 2004, using re-branded kiosks manufactured and operated by Silicon Valley-based DVDPlay, at 140 McDonald's restaurants in Denver and other test markets. In April 2005, Redbox phased out the DVDPlay-manufactured machines and contracted the Solectron facility in Creedmoor, NC — later purchased by Flextronics International, in October 2007 (Flextronics is also known as the manufacturer of the Zune, Xbox and Xbox 360) — to create and manufacture a custom kiosk design. The new kiosk was designed by Flextronics' Creedmoor design team, which included engineers Steven Hancock and John Rupert as key contributors under the direction of Franz Kuehnrich at GetAMovie Inc. (which was bought by RedBox). Other key contributors from Flextronics included Flextronics Global Account Manager Dave Stadelmaier and Global Supply Chain Manager Ben Wheeler (The KioskGuy). Redbox was innovative in that its carousel design not only decreased the number of robotic movements necessary to dispense and restock inventory, it also dramatically increased the number of discs (from 100 to 700+) that could be stored within a kiosk. In addition, the software, designed and developed by Enterprise Logic Systems, was also innovative in that it allowed RedBox to remotely monitor and manage inventory at all kiosks throughout the country.
The company's typical self-service vending kiosk combines an interactive touch screen and sign. It uses a robotic disc 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 3% of the company's revenue comes from used-disc sales.
Movie studio distribution issues
With growing concern in 2009 that DVD kiosks might jeopardize movie studio income from DVD sales and rentals, three major movie studios, 20th Century Fox, Warner Bros., and Universal Studios, separately refused to sell DVDs to Redbox until at least 28 days after their arrival in stores. Fox and Warner Bros. represented 62 percent of home video rental revenue in 2008–09.
Redbox responded by filing lawsuits, first, against Universal in October 2008, then against 20th Century Fox and Warner Bros. in August 2009. In August 2009, the federal judge hearing the Universal case allowed an antitrust claim to continue. In October 2009, 20th Century Fox and Warner Bros. filed motions to dismiss Redbox's lawsuits against them. During this time, Redbox continued to rent films from these companies, purchasing them retail from places like Walmart instead of receiving them from the movie studios, which in some cases saved Redbox in costs due to the discounted prices offered by retailers.
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 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, 2010. 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 continued to sign additional and new distribution deals with these and other movie studios; by 2017, titles from Fox and Warner became available on Redbox seven days after their initial home-video release.
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