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
The Redbox Experience
Redbox's business model was quite simple. A customer could rent a DVD for a day from a kiosk for US$ 1 plus tax. The DVD could be rented at any time during the day, but had to be returned to a Redbox kiosk before 7 PM the next day...
Problems with Movie Studios
However, some major Hollywood movie studios, as well as a few analysts felt that Redbox's low rental charges, and its practice of selling used disks, was not only affecting DVD sales, but also creating a surplus of used DVDs in the market...
Redbox faced competition from other DVD rental kiosks, online video rentals like Netflix, Inc. (Netflix), and brick-and-mortar stores like Blockbuster, Inc. (Blockbuster) and Movie Gallery, Inc...
DVD rental transactions in the US grew by 1.8% between 2007 and 2008, to US$ 2.6 billion. Redbox's market share (which was 1% in 2006 and 2.3% in 2007), increased to 9% in 2008, and stood at 13.8% for the first six months of 2009...
Exhibit I: The Redbox Logo
Exhibit II: The Major US Film Studios as of 2009
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