Redbox

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Redbox Automated Retail, LLC
Type Subsidiary of Coinstar
Founded 2003
Headquarters Oakbrook Terrace, Illinois
Key people Gregg Kaplan, CEO
Mitch Lowe, COO
John Harvey, CFO
Industry Retail/DVD rental
Website http://www.redbox.com/

Redbox is an American company that specializes in the vending of DVDs, and possibly Video Games in the near future,[1] via self-service/interactive kiosks.

Projected to number 22,000 by December 2009,[2] Redbox kiosks are located across the United States in fast food restaurants, pharmacies, grocery stores, and convenience stores and can be identified by their trademark red appearance and the slight arching of their top surface, abstracted in the company's logo.

Redbox was ranked as the fifth largest DVD rental company by revenue in the United States in April 2007 by the Entertainment Merchants Association[3].

Contents

[edit] History

Redbox Automated Retail LLC was initially funded by McDonald's Ventures, LLC, a wholly owned subsidiary of McDonald’s Corp. In 2005, Coinstar bought 47 percent of the company. [4] In February 2009, Coinstar paid McDonald’s and other shareholders between $169 and $176 million for the rest of the company.[5][6]

The company passed Blockbuster in 2007 in number of U.S. locations[7] and passed 100 million rentals in February 2008.[8] Competitors include The New Release (aka Moviecube), DVDXpress, DVDplay and Blockbuster. DVD vending companies currently have 19% of the DVD rental market, with 36 percent to rent-by-mail services and 45 percent to traditional stores.[2]

President Mitch Lowe joined Redbox as Chief Operating Officer in 2005 after a period at McDonald's and co-founding Netflix.[9] Lowe had experimented in 1982 with a short-lived VHS movie vending company named Video Droid.[2]

[edit] Kiosk design and operation

A Redbox kiosk in front of a Walgreens in Streator, IL.

Redbox began in 2004, using re-branded kiosks manufactured and operated by Silicon Valley-based DVDPlay, at 140 McDonald's restaurants in their Denver and other test markets.[10] The first DVD rental kiosks in Washington, D.C. accompanied the company's unsuccessful attempt at automated convenience store kiosks.[3] In April 2005, Redbox phased out the DVDPlay-manufactured machines and contracted Solectron — a subsidiary of Flextronics, which also manufactures the Zune, Xbox and Xbox 360 — to create and manufacture a custom kiosk design. [11]

A Redbox barcoded DVD tray, delivered by and returned to the kiosk.
Newer Redbox casing, August 2009.

The company's typical self-service vending kiosk combines an interactive touch screen and sign, a robotic disk array system[12] and web-linked electronic communications. Kiosks can hold more than 600 DVDs with 70-200 titles, updated weekly.[13] DVDs can be returned the next day to any of the company's kiosks; charges accrue up to 25 days, after which the customer then owns the DVD (without the original case) and rental charges cease. Customers can also reserve DVDs online, made possible by real-time inventory updates on the company's website.[14] While customers can buy used dvds from the kiosks (with unsold used dvds returned to suppliers), Redbox estimates only 1% to 3% of the company's revenue comes from used disc sales.[15]

A Redbox kiosk rents its average DVD 15 times at $1 a transaction plus any applicable taxes.[2]

[edit] Movie studio lawsuits

With growing concern in 2009 that DVD kiosks may cannibalize DVD sales and rentals, three major movie studios, 20th Century Fox, Warner Brothers and Universal, separately refused to sell DVDs to Redbox until at least 28 days after their arrival in stores.[2] Since Redbox’s business model relies upon new releases,[2] and just Fox and Warner Brothers represented 62 percent of home video rental revenue in 2008-09, analysts have said that this “windowing” of new releases by the three studios may make Redbox’s business model unviable.[16][17]

Redbox responded by filing lawsuits, first, against Universal in October 2008,[18] then against 20th Century Fox and Warner Brothers in August 2009.[19][20] In these lawsuits, Redbox has asserted three claims against the studios: copyright misuse, tortious interference, and antitrust claims. In August 2009, the federal judge hearing the Universal case rejected the first two claims, but allowed the antitrust claim to continue.[21] While the judge found sufficient merit in the antitrust claim to allow the case to continue, some independent observers doubt it can succeed, since Redbox "must show that the studios worked together as a cartel... There is little evidence of an industrywide conspiracy."[20][16] In October 2009, 20th Century Fox and Warner Brothers filed motions to dismiss Redbox's lawsuits against them, with Fox arguing that "antitrust law does not require a seller to provide its product through the distribution channel that the buyer demands, on the date that the buyer demands, or at the price that the buyer demands,"[22] and Warner Brothers saying that "This is precisely the type of routine business dispute, motivated solely by a merchant’s attempt to protect its profits rather than to protect competition, that the antitrust laws are not meant to address." [23] Redbox stands by the legal merits of their lawsuits,[22] and has started an online campaign.[24]

Other major studios, Sony Pictures, Paramount Pictures, and Lionsgate, signed distribution deals with Redbox.[2] The Walt Disney Company permits third-party distributors to sell to Redbox, but has not entered into a direct relationship with the company.[2] Both sides of the studio lawsuits have pointed to these revenue-sharing deals to shore up their argument, with Redbox President Mitch Lowe saying "our growth can lead to theirs [the studios' growth]. For example, Redbox currently estimates we will pay more than a combined $1 billion over the next five years to Sony, Lionsgate and Paramount to purchase and then rent new release DVDs to consumers,"[25] while Warner Brothers says the deals are proof that far from being shut out by Hollywood, "Redbox’s business has thrived since its suit against Universal, underscored by lucrative distribution deals with Paramount Home Entertainment, Sony Pictures Home Entertainment and Lionsgate."[23]

[edit] See also

Companies portal

[edit] References

  1. ^ "Redbox Video Game Advertised Sales Test Fact Sheet". Red box press room. http://redboxpressroom.com/releases/FactSheet_VideoGame.html. Retrieved 2009-12-14. 
  2. ^ a b c d e f g h Barnes, Brooks (September 6, 2009). "Movie Studios See a Threat in Growth of Redbox". New York Times. http://www.nytimes.com/2009/09/07/business/media/07redbox.html?ref=technology. 
  3. ^ a b Mui, Ylan Q. (April 28, 2007). "Redbox Finds Its Niche Focus on DVDs, Grocery Locations Fuel Growth". Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2007/04/27/AR2007042702295.html?nav=emailpage. 
  4. ^ http://agreements.realdealdocs.com/Stock-Purchase-Agreement/LLC-INTEREST-PURCHASE-AGREEMENT-350887/
  5. ^ http://techdirt.com/articles/20090213/1041213764.shtml
  6. ^ "http://www.dmwmedia.com/news/2009/02/13/coinstar-buys-rest-dvd-kiosk-firm-redbox-$176m". Digital Media Wire, Mark Hefflinger, February 13, 2009. http://www.dmwmedia.com/news/2009/02/13/coinstar-buys-rest-dvd-kiosk-firm-redbox-$176m. 
  7. ^ "Redbox surpasses Blockbuster in number of U.S. locations". Kioskmarketplace.com, 26 Nov 2007. http://www.kioskmarketplace.com/article.php?id=18858&na=1. 
  8. ^ "Redbox surpasses 100 million DVD rentals Redbox surpasses Blockbuster in number of U.S. locations". Kioskmarketplace.com, Feb 2008. http://www.kioskmarketplace.com/article.php?id=19242&na=1. 
  9. ^ "Six Questions: Redbox's Mitch Lowe". Home Media Magazine. 2009-07-31. http://www.homemediamagazine.com/redbox/six-questions-redboxs-mitch-lowe-16603. Retrieved 2009-09-07. 
  10. ^ "McDonald’s Orders More McDVD". Home Media Magazine, Holly J. Wagner, May 2, 2005. http://www.videostoremag.com/news/html/breaking_article.cfm?article_id=7467. 
  11. ^ "Redbox names Solectron worldwide manufacturer of DVD kiosks". EMSNOW.com, 28 Apr 2005. http://www.emsnow.com/newsarchives/archivedetails.cfm?ID=8881. 
  12. ^ "SSKA's official show wraps up in Orlando". Kiosks.org, 20 Feb 2006. http://www.kiosks.org/article_1399_23.php. 
  13. ^ "Is Redbox friend or foe what to know if you invest in movie industry stocks". paliresearch.com (free registration required). http://paliresearch.com/wp-login.php?redirect_to=%2F2009%2F07%2F28%2Fis-redbox-friend-or-foe-what-to-know-if-you-invest-in-movie-industry-stocks%2F. 
  14. ^ "Rise of redbox. Some kiosks are located outside store location in parking areas.". Selfserviceworld.com, Bill Yackey,20 Aug 2007. http://www.selfserviceworld.com/article.php?id=18316. 
  15. ^ "The Lowe-down on Redbox". Videobusiness.com, Marcia Magiera, August 12, 2009. http://www.videobusiness.com/blog/1120000312/post/850047685.html?nid=4756&rid=. 
  16. ^ a b "Redbox's Lawsuit Now Stands On Only One Shaky Leg as Court Dismisses First Sale Complaint". Pali Research, Richard Greenfield, 2009-08-18 (free registration required). http://paliresearch.com/2009/08/18/redboxs-lawsuit-now-stands-on-only-one-shaky-leg-as-court-dismisses-first-sale-complaint/. 
  17. ^ "Analyst: Dismissal of Redbox Claims Could Undermine Kiosk Viability." Home Media Magazine, Erik Gruenwedel, 2009-10-05.
  18. ^ "Redbox Files Lawsuit Against Universal." Redbox Press Release, 2008-10-13
  19. ^ "Redbox sues 20th Century Fox over DVD rentals." Reuters, Tom Hals and Sue Zeidler, 2009-08-12.
  20. ^ a b "Coinstar’s Redbox Sues Warner Unit Over Video Terms". Bloomberg News, Sophia Pearson and Phil Milford, 2009-08-19. http://www.bloomberg.com/apps/news?pid=20601103&sid=apskdfBT_Zms. 
  21. ^ "Judge Throws Out Some Redbox Claims in Universal Suit." Home Media Magazine, Chris Tribbey, 2009-08-17.
  22. ^ a b "Fox Says Redbox Lawsuit is Flawed". Home Media Magazine, Erik Gruenwedel, 2009-10-01. http://www.homemediamagazine.com/redbox/fox-says-redbox-lawsuit-flawed-17210. 
  23. ^ a b "Warner Also Seeks Redbox Lawsuit Dismissal". Home Media Magazine, Erik Gruenwedel, 2009-10-02. http://www.homemediamagazine.com/warner/warner-also-seeks-redbox-lawsuit-dismissal-17215. 
  24. ^ savelowcostdvds.com
  25. ^ "Redbox Chief: 'We Are an Engine for Industry Growth'" The Wrap, Mitch Lowe, 2009-10-02

[edit] External links

Retrieved from "http://en.wikipedia.org/wiki/Redbox"