Indie retailers take aim at Redbox
By Susanne Ault -- Video Business,09/04/2009
SEPT. 4 | PHYSICAL: As Redbox battles three of the major studios in court, a group of independent bricks-and-mortar video retailers is working on a campaign to convince consumers that the kiosk operator’s $1-a-night rentals are putting the entire entertainment industry at risk.
Meanwhile, a study released this week by SNL Kagan suggests that Redbox’s low prices could hurt the burgeoning video-on-demand segment as VOD companies would not be able to match the kiosks’ prices while maintaining profitability.
The Video Buyers Group, one of the main drivers for the indie retailer campaign, said its 1,700 mostly mom-and-pop member stores are struggling to compete with Redbox’s inexpensive rentals. VBG and an unspecified publications firm are reaching out to studios and guilds to secure their support and/or participation.
The campaign aim’s to show Redbox as hurting future film production because studios are generating less revenue due to the $1 rentals, as opposed to the $3 to $5 rentals or $15 to $20 DVD sales available at traditional retail outlets.
Print, online and TV ads will encourage the public to drop Redbox as a source for DVDs.
A spokesman for Redbox had no comment.
“Dollar rental kiosks are to the film industry as the Internet was to the music industry,” VBG president Ted Engen said. “That’s how bad this thing can get.”
Apart from VBG, no other businesses have formally signed onto the campaign, but there is indication of some studios being sympathetic to the group’s cause.
“One company can’t be allowed to artificially reduce the value and availability of movies,” said one studio source. “Redbox’s short-term gains will shortly wreak havoc on producers, writers, laborers and ultimately consumers who love a broad selection of movies. If you don’t work with Redbox on its terms, it sues.”
The kiosk operator has split the major studios. Warner Home Video, Universal Studios Home Entertainment and 20th Century Fox Home Entertainment have tried to impose a kiosk window at least 30 days after the general retail street date of their titles, and Redbox responded by suing the studios. Sony Pictures Home Entertainment, Lionsgate and Paramount Home Entertainment, however, have signed lucrative distribution deals with Redbox. Walt Disney Studios Home Entertainment has an agreement with the kiosk operator in regard to limiting used DVD sales.
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| Submitted by: | dj (dj@ilovemovies.com) 11/9/2009 3:04:06 PM PT |
| Location: | america |
| Occupation: | indie store owner-T-Rex Video |
Hang in there, Indies. No one really know how this going to come out.
Last week, after redbox posted "record" revenue, their stock took a
nose dive. There is so much more going on here.
Besides if you've been in the business like I have since the eighties,
you know, there have been at 20 or 30 "New advances" that were going
to the end of video stores.
Yeah, everyone says we're dinosaurs. But the dinosaurs ruled earth for
60 million years!!!!
Go Indie Stores!!!
| Submitted by: | Eric J White (ejwhite@vrinnovations.com) 11/6/2009 11:33:36 PM PT |
| Location: | York, PA |
| Occupation: | Poor Business man |
Yes, Rentrak was screwing us.
Apparently, you guys weren't privy to the rentrak deal back in the beginning.
It wasn't a "choice."
It was a control. If you agreed to use rentrak THEY told you exactly how many copies of each title you BOUGHT. Notice I said, not got, I said BOUGHT. You paid $10-12 PER copy, and put in how many THEY calculated you used. You were also forced to use their software and share ALL your business records with them. You essentially turned over your business to them for about 40% of the revenue of the title.
Now remember, this was shortly after we, as an industry successfully fought off the studios from putting us out of business completely with a landmark decision on the first sale doctrine. Thereby allowing ANY OF YOU to exist after us, instead of just being part of the studio's system forever.
And, in addition, the smack in the face was, rentrak was started by national video's founder. Many of us had them as an arch enemy that used predatory pricing to do battle with local stores. This deal allowed them to crush many of the small retailers.
Look around....how many independents do you see? That's the result of Rentrak.
So, yea, "Wondering," you should take a step back and learn about what happened before. Everything looks simple through the lens of history. Some of us didn't want to become studio employees. Those same studios that are "just trying to protect their assets," are the same studios that tried to crush us out of business, and called us criminals for creating the home entertainment industry. Where would they be today without it? Had the studios had their way, there would have NEVER been sell through priced titles. na dyyou would have never been able to watch anywhere but the theater for whatever price they chose.
Don't ask me to cry for creating a second stream of income for them.
| Submitted by: | Pat Sollee 9/8/2009 11:27:03 PM PT |
| Occupation: | Investor |
Sadly for the video rental stores, the movie studios brought this upon themselves. They devalued (decrease price) new release DVD to increase sales (short term). Now a company that is not stuck with lots of debt (BBI and Movie Gallery) and does not have to abide by old revenue sharing deals. They can simply buy, rent it out a bunch of times, then sell the used video.
With their short sighted pricing policies, the studios bankrupted many a video store (Movie Gallery, independents, with Blockbuster being on the edge). They deserve what they get.
What the studios wanted was a world with a few high priced rentals, where everyone mostly bought not rented. However, now they have a world with low priced retail, AND low priced rental.
| Submitted by: | Kenneth J. Chester, jr. (motornewsmedia@live.com) 9/8/2009 3:42:47 PM PT |
| Location: | Urbandale, Iowa |
| Occupation: | automotive writer |
People... welcome to the future!
Here is the hardcore truth - convenience and price will ALWAYS trump the CW (conventional wisdom)! I am a proud Redbox user and they are ALL OVER our part of town - in fact.. within a mile of the local Video Store there are 4 Redbox machines.
Technology will continue to drive prices down - regardless of the industry you are in. How do I know? I own a company that writes vehicle reviews for newspapers! Talk about being screwed!
The good news is that we saw it coming -- the bad news? Faster than we can react to it. But at least we will be adopting the new technology and deliver our content a different way.
The rise of Netflix and Redbox is a new delivery system for movies. Get with the program Video industry!
| Submitted by: | man 9/7/2009 9:34:16 PM PT |
| Location: | Georgia |
| Occupation: | BB SM |
I am a BB employee for disclosure's sake. Kiosks are not going away, but their pricing scheme isnt sustainable. Granted it is a great prospect for the consumer, but the consumption is out pacing sustainable production. If no one can make their money back on their movies then they can make fewer or none. Redbox cant keep stocking movie if there are none.
Studios cutting Redbox off is not preventing them from getting the product, it just raises the cost and copy depth. A window allows an extension of the life cycle of the dvds. Customers that are that concerned about price will be willing to wait; Just like those who don't want to pay $6-$15 a head to go to the theatre wait for dvd rentals in stores or by mail.
| Submitted by: | John Johnson 9/7/2009 10:46:47 AM PT |
| Location: | omaha, NB |
| Occupation: | analyst |
The facts are readily available for anyone who want to look at them.
Coinstar/Redbox is not profitable unless they have the wholesalers offering them the buyback deal or they get an contract like what Sony has sold.
If they had to compete on the same level as BB or the indies, they would be losing massive amounts of money per machine.
They know this and that is why Redbox is fighting so hard to prevent the studios from making them play on a level playing field.
Last quarter, Coinstar averaged $120 profit per machine, if you factor out all of their other businesses. Now take away their $5.00 up front cost for movies and make them pay $12-$15.00 per movie and you can see that they will be losing money after having to pay out for 10-15 movies a month.
The studios want Redbox to play fair so they are forcing the wholesalers to sell on an equal level to them. This is entirely fair.
If Redbox wants to buy their product at an equal wholesale price, then let them. But I can guarantee you will see those machines die a quick death if that actually happens.
| Submitted by: | Fred Davie 9/6/2009 9:18:21 AM PT |
| Location: | Browns Point |
| Occupation: | store owner |
Independents can fight back. Everytime you walk by a Redbox tape a sign on it that says "out of order."
| Submitted by: | Mark Tusher 9/5/2009 10:10:39 PM PT |
| Location: | Boulder County |
| Occupation: | video rentailer emeritus |
I can't help but wonder how successful Coinstar's Redbox would have become if the wholesale distriubtors weren't subsidizing their trek with $7.00 buybacks.
Redbox's model makes sense on many levels. The tragedy of it--the ramifications. Fewer and fewer video stores. I actually enjoy speaking to real people in real video stores that have more than the Top 50 movies.
I think the studios are a little slow to the game but what else is new? Should have pressured the wholesalers much earlier to stop subsidizing these guys.
Anybody out there see "The Assassination of Richard Nixon"? (You won't find it at your red kiosk.) Sean Penn keeps repeating in the mirror, "It's all about the money Dick." He's got that right!
BTW, the two local independent video stores here in north Denver metro area are both $1.99 for one day, $2.99 for 5. And huge vast selection. In case somebody out there has already seen "17 Again."
| Submitted by: | Wondering? 9/5/2009 9:40:58 AM PT |
Eric, you say you were getting screwed with the $72 price tag back in the day but then say you were screwed by the Rentrak deal, which was it? You have/had the ability to buy from Rentrak yet chose to stay with the higher price? I know where you're coming from but I almost wish they price had stayed high because it's not Rentrak that hurts, it's the large retailers like Wall Mart and Target that now run the show with.
Also, the studios (some) aren't just trying to stop Redbox from renting for $1, they're trying to control the avenues of distribution for their product. They have every right to do so. Just as they dictate when a movie is released Theatrically, on video, on cable and on local broadcasting. I'm not a fan of the studio's usually because they aren't the sharpest tools in the shed, but I'm ok with them trying to protect their assets.
| Submitted by: | Steven Vidaurri (digitalmonkeys@msn.com) 9/5/2009 5:23:21 AM PT |
| Location: | Michigan |
| Occupation: | Entrepreneur |
As a customer Redbox is a huge win: I can rent online, return a rental to any location, they are conveniently located at most grocery stores, no membership, straightforward rental policies, no smart-@ss kids working the register, and great telephone customer service.
Independents/chains want $3-4+ for anywhere from a couple of days to a couple of weeks (Blockbuster) for a rental. I only need one night, so why pay 4x the price?
The studios want a piece of everything, why should they be allowed to dictate rental terms after you purchase their product? Do you think Hertz/Enterprise pay a cut to Ford/GMC/Honda everytime it rents a vehicle? Does the hardware store pay a cut to Craftsman when it rents a rototiller?
If you have a bricks and mortar store and have not switched to a $1/night rental plan and Redbox is killing your business then you failed to see which direction the wind was blowing and change course. Independents always complain when someone comes up with a better idea, studios always bully anyone that doesn't share their profit with them.
Redbox is not ruining the entertainment business. If you want to point fingers, you should look back at when Blockbuster was charging $4 for a 2 day rental and $4 for a late fee. People looked at $8/rent compared to $15/buy and switched. Then after a few years of buying movies some never even being opened, most now worth only $5-8 people gave up on that too. Blockbuster and the studios trained the average customer to buy at $15 rather then to rent+late fee at $8+. When the customer realized how much they were spending at $15 to buy every week they bailed. Why buy at $15 when I can get a whole month of rentals at Netflix for the same. Now why get Netflix and have to wait when I can rent 15 movies at Redbox for that price?
Brick & morter rentailers who lack vision and stubbornly refuse to go to a $1/night or a monthly fee/unlimted rental structure will fail when put up against Redbox and the likes. Even Blockbuster is shuttering stores and has signed agreements to brand rental box machines.
The days of 4000 sq ft stores with a vast library of old movies and an empty wall of new releases, of $16 used DVD's for sale and staff that are rude are long gone. If you want to survive you need to change. Do you know what is going to kill Redbox? Do you know what's coming next? When a company can do with movies what Apple did with music: get a vast library of movies and allow you to download to rent for $1/night. If a company came along that had every movie I'd ever want to watch and I could rent/watch instantly for $1, I'd never buy another movie. It'd be great for the environment, great for the consumer, people would watch more movies and most bricks and mortar or rental machine businesses would be obsolete. The internet didn't hurt the music industry, pirated music and greed by the RIAA did.
So, if you still charge $4 for a new release and you don't specialize in some niche market that a machine can't compete with like video games, foreign, anime, etc. then do us a favor and close up now. If you want to survive, move to a smaller location, throw that old catalgue product behind the counter (readily available when a customer asks for it), beef up your video game product, and do away with rental schemes and simplify to a $1/night strategy.
As far as the studios, once I buy a DVD (Blu-ray, etc.) it's mine to rent, backup or duplicate as I please so long as I don't distribute pirated copies they should keep their greedy hands out of everyone else's business. They have no right to dictate when I can rent, for how much, when I can sell PVP and for how much etc. The studios are not hurting for cash, actors are not losing their jobs, $1 rentals will not kill the entertainment industry but they might resurrect the rental business.
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