Redbox: Even Without Cool Technology, It Makes Sense

July 8th, 2009

I’m a big Netflix fan but admit some interest in Redbox. If you aren’t familiar with the service, it’s basically video rental through a vending machine. The “kiosks” are set up in well-traveled retail locations like grocery stores and McDonald’s. That may seem pretty “old school” but the details make it rather compelling:

• $1 per night. No monthly or late fees, although if you keep a movie out for $25 worth the charges are capped and you just bought yourself a DVD.
• Pick up and return DVDs at any Redbox kiosk.
• You can rent DVDs directly at a kiosk on the spot, or reserve a movie in advance online via their website, and then visit a vending machine to pick it up.
• Selection centers around recent releases.

Although it’s hard to imagine a service more convenient than Netflix, Redbox solves a few Netflix annoyances:

• Picking up DVDs locally in kiosks is faster than ordering a DVD online and waiting for it to arrive in the mail, satisfying the common “impulse rent” aspect.
• Placing kiosks in grocery stores is borderline genius — I’m sure most people visit a grocery store at least once a week.
• The unwatched Netflix movie: We all know the situation of a Netflix movie sitting on a counter, unwatched for days. If you fail to watch several movies a month, the monthly Netflix fee is wasted. Meanwhile, since Redbox is $1 per night with no monthly fee, you can easily pause after returning a DVD for weeks at a time. So with the cheapest Netflix plan being about $5, you may be better off with Redbox if you watch less than five movies a month and visit a grocery store at least once a week.

So Netflix is a better deal if you watch tons of movies a month, like to watch movies outside the range of recent releases, and are organized / tech saavy enough to set up an online queue and take advantage of Watch Instantly. And Redbox is a better deal if you watch less than five movies a month, visit a grocery store regularly, watch mostly recent releases, and don’t want to spend time managing a queue, or have no interest in watching movies on your computer.

I think it’s pretty obvious that the vast majority of the population falls in the Redbox category.

But thinking further: Netflix is well aware that DVD by mail strategy is a dead end, and their solution is online streaming as their delivery method. But by choosing this path, all sorts of road blocks pop up:

• Studio rights — all the content has to be licensed from the studios.
• Broadband is necessary to stream video.
• Hooking the service up to the TV requires new hardware (XBOX, Roku, fancy new TV or Blu-Ray player), plus additional tech savvy.
• Cable companies, in cahoots with broadband and studios will surely try to slow Netflix down, through broadband caps, limiting licensing agreements, or other borderline dirty tricks.

The end result: Watch Instantly has poor selection, giving many viewers less incentive to figure out how to get it on their television. You can see Netflix scrambling to beef up their selection and add software to various hardware to make installation a non-issue, but meanwhile, most families have DVD players right now.

But there’s also a statement about cool technology vs. what actually works for the end user. To technophiles, it seems like a given that Internet distribution for video is the future, physical media are dead, and Netflix is totally on the right track.

But to average joe user, none of this tech matters. They just want to watch a movie at a fair price in the most convenient way possible. They’re too busy to watch tons of movies or set up new boxes in the increasingly crowded entertainment system. They don’t care whether a movie is available through streaming,  DVD, or cable. They already have a DVD player right now that works just fine, and each time they go to the grocery store, they see a Redbox kiosk. And grocery stores aren’t owned by movie studios that have a vested interest in keeping this content from shoppers.

Until Netflix’s fancy schmancy futuristic technology becomes mainstream (if it ever does), I can see how it could be trumped by “old-school” vending machines in a grocery store. And although the technology / movie lover in me hates the concept behind Redbox — every other part of me (namely, the wallet) can clearly see how it makes a lot of sense.