Redbox: Disruptive Innovation in DVD Rentals
Case Code: BSTR359
Case Length: 14 Pages
Pub Date: 2010
Teaching Note: Not Available
Organization: Redbox Automated Retail, Redbox Automated LLC
Industry: DVD Rentals, Entertainment
Themes: Innovation, Business Models, Differentiation, Pricing Strategy
Abstract Case Intro 1 Case Intro 2 Excerpts
"I do not think this will destroy the film business, but it's certainly a major issue over the next few years, especially if it continues to grow at the rate it's growing. Whether or not the titles get sold at the end of it, $1 a day does not help the entire movie industry."
- Rich Greenfield, Analyst at investment research firm, Pali Capital, talking about Redbox, Inc. in 2009.
"Redbox is firing on all cylinders. They have good hardware and software, good marketing and good partnerships for their deployment locations."
- Rufus Connell, Research Director for Information Technology at consulting firm, Frost & Sullivan, in 2007.
In August 2009, Paramount Home Entertainment (Paramount) announced that it was beginning a trial licensing program with Redbox Automated Retail, LLC (Redbox) the leading automated kiosk rental service in the US, which offered DVDs on rent for US$ 1/ day.
Under the trial license program, Paramount would provide its DVDs to Redbox on the street date itself. The trial period was to be till the end of 2009, during which time Paramount would analyze the rental information provided by Redbox to decide, whether to continue the arrangement until 2014. Paramount would receive US$ 575 million and 20% kiosk space, if the deal was extended. If the deal did not materialize, Redbox undertook to remove and destroy Paramount DVDs from their kiosks, by the end of the year. Redbox was founded in 2002 and was owned by Coinstar Inc. (Coinstar). Using patented technology, Redbox provided its customers a wide selection of movies, an online reservation option and the facility to rent a DVD from one kiosk and return it to another. By August 2009, it had a presence at over 17,500 locations in retail stores and restaurants across the US, providing tough competition to traditional 'brick-and-mortar' stores and online DVD rental services. Redbox's earnings increased during the recession in the US, with more people opting to rent DVDs, rather than purchase them...
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