What started as a free-standing red box with $1 movie rentals has become a powerful player in the rapidly changing market place. Multi-industry kiosk giant Coinstar acquired Blockbuster’s branded DVD kiosks, with plans to convert the nearly 10,000 locations to the popular Redbox brand. The deal further solidified Redbox’s position as the nation’s leading DVD rental company, despite the rise of streaming video and increased competition from internet based by-mail services, most prominently Netflix.
With Netflix’s customer satisfaction declining due to a now-redacted plan to split DVD rentals from streaming services and raise the price of both, Redbox’s low cost and physical presence in retail stores became increasingly influential in 2011. Coinstar’s earnings grew impressively in Q4, even despite disappointing projections.
Redbox did take a gamble with its more customer-friendly model and raised its prices, with the cost of an overnight rental purchased at a kiosk rising from $1 to $1.20. However, initially, users who pre-reserved DVDs online or via the Redbox mobile app were rewarded with an unchanged $1 fee. To combat consumer drop-off as a result of the increase in price, the company is preparing to launch a new streaming service, partnered with Verizon, leveraging the digital market to better position its treasured centerpiece against streaming competition like Hulu and Amazon Instant Video.
Redbox is proving that although a physical presence is still powerful, digital innovation is the only way to capture consumer market share. Time will tell if the company can adapt enough to stay on top of the heap.