Redbox

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For other uses, see Red box (disambiguation).
Redbox Automated Retail, LLC
Type Subsidiary
Industry Retail/DVD rental
Founded 2002
Headquarters Oakbrook Terrace, Illinois, United States
Area served North America
Key people

Mark Horak, President of Redbox, Former Presidents: Anne Saunders & J Mitch Lowe

Gregg Kaplan, Founder of Redbox, CEO of Redbox (2002-2009), COO & President of Outerwall (2009-Present)[1]
Parent Outerwall, Inc.
Website redbox.com

Redbox Automated Retail, LLC is a subsidiary of Outerwall, Inc. specializing in DVD, Blu-ray Disc, and video game rentals via automated retail kiosks. As of the end of November 2012, Redbox had over 42,000 kiosks at more than 34,000 locations.[2]

Redbox kiosks feature the company's signature red color and are located at convenience stores, fast-food restaurants, grocery stores, mass retailers, and pharmacies. The company announced in February 2012 the deployment of kiosks in Canada to test the Canadian market.[3]

Redbox had 47.8% market share of the physical rental market, as of Q1 2013, as stated by the NPD Group.[4]

History[edit]

Redbox Automated Retail LLC was initially funded by McDonald's Corporation.[5] In 2002, the company placed four automated convenience store kiosks that sold grocery items such as milk, eggs, and sandwiches as well as 11 DVD-rental kiosks in Washington Metropolitan Area locations. Redbox withdrew the grocery kiosks within a year, but the DVD-rental kiosks succeeded, and the company changed its focus to that market. In 2005, Coinstar bought 47 percent of the company for $32 million.[6] In early 2008, Coinstar exercised an option to increase its share from 47% to 51%.[6] In February 2009, Coinstar paid McDonald’s and other shareholders between $169 and $176 million for the remainder of the company.[7]

The company surpassed Blockbuster in 2007 in number of U.S. locations,[8] passed 100 million rentals in February 2008,[9] and passed 1 billion rentals in September 2010.[10] Competitors include Netflix and Blockbuster. In Q2 2011, kiosks currently account for 36 percent of the disc rental market, with 38 percent of that attributable to rent-by-mail services and 25 percent to traditional stores, according to the NPD Group. As of Q2 2011, 68 percent of the U.S. population lives within a five-minute drive of a Redbox kiosk.[11] The numbers for Q2 2013 shows that the Redbox rentals had surpassed 50 percent of the total disc rentals in the country.[12]

Mitch Lowe joined Redbox in 2003 after spending five years as a cofounder of Netflix. At Redbox, he started first as a consultant and then as VP of Purchasing & Operations. In 2005, he became the Chief Operating Officer of Redbox.[13] Lowe had experimented in 1982 with a short-lived VHS movie vending company named Video Droid.[14] Mitch Lowe was named President of Redbox in April 2009.

In July 2010, Redbox announced that they were beginning to rent Blu-ray movies at 13,000 kiosks nationwide, and Blu-ray Discs were available across the Redbox network by the fall of 2010.[15] In October 2010, the company began testing video game rentals in Reno, Nevada; Orlando, Florida; Stevens Point, Wisconsin; Austin, Texas; Wilmington, North Carolina; and Corvallis, Oregon. In June 2011, Redbox launched video game rentals nationwide. Games for all major platforms are offered, including Wii, PlayStation 3, and Xbox 360.[16]

In February 2012, Redbox announced the purchase of former competitor Blockbuster Express (NCR) for $100 million. The acquisition included over 10,000 DVD kiosks, certain retailer contracts, and DVD inventory. As part of the agreement, Redbox entered a supplier arrangement of purchasing product and services from NCR.[17] On June 27, 2012, Redbox sent an email to its customers announcing that it had completed the purchase of Blockbuster Express on June 23.[18]

In 2012, Redbox's founder, Gregg Kaplan, exited Coinstar as president and COO of Redbox. Anne Saunders became the new president of Redbox.[19]

In July 2013, Redbox announced its 3 billionth rental of a disc, counting both movies and games.[20]

On October 7, 2013, Barry Rosenstein's hedge fund JANA Partners filed a 13D on shares of Outerwall (OUTR) and has disclosed a new 13.5% ownership stake in OUTR with 3,777,995 shares. The activist 13D filing includes that JANA expects to talk with management. In particular, they want to focus on "a review of strategic alternatives including exploring a strategic transaction, selling or discontinuing certain businesses, or pursuing a sale."[21] The founder of the hedge fund Jana Partners Barry Rosenstein told "Closing Bell", about Redbox, the company is "gushing with cash".[22] On December 9, 2013, Outerwall cut 8.5% of workforce.[23]

Redbox Instant[edit]

Redbox began internally testing a video streaming service, dubbed Redbox Instant, in July 2012. The service is a joint effort between Redbox and Verizon.[24] On March 14, 2013 Redbox Instant by Verizon officially went public, offering customers a free 1-month trial of an $8/month unlimited streaming service that includes 4 disc rentals from kiosks ($1 more for Blu-ray).[25] The service launched with 4,600 titles from movie companies such as EPIX, Lionsgate, NBCUniversal, Paramount Pictures, Relativity, and Sony Pictures. According to earlier reports, Redbox Instant was going to allow users to download content to mobile devices for offline viewing.[26] However, Redbox does not offer downloads as of early 2014. Redbox titles can be rented or purchased, in SD or HD quality. When customers rent a title, they have 30 days to begin watching it and then 48 hours to watch it as many times as they like.

In June 2013, Sony made the official announcement at E3 that Redbox Instant will be available on the Playstation 4 console, and it was released in late 2013. Android and iOS apps also enable streaming content on mobile devices.

The service disabled sign ups for new users in mid 2014 owing to a growing number of criminals using the site to verify stolen credit cards.[27] In Q2 2014 earning call, Outerwall, Red Box's parent company, stated that they were "not pleased" with Redbox Instant subscription numbers. [27] Finally on October 4, 2014, it was announced that Redbox Instant would be shutting down on October 7, only 19 months after its initial launch.

Kiosk design and operation[edit]

A Redbox kiosk.
The carousel of DVDs inside of a Redbox machine.

Redbox began in 2004, using re-branded kiosks manufactured and operated by Silicon Valley-based DVDPlay, at 140 McDonald's restaurants in Denver and other test markets.[28] 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.[29] The new kiosk was designed by Franz Kuehnrich at GetAMovie Inc.[30] (which was bought by RedBox). It was innovative [31] in that its carousel design not only decreased the number of robotic movements necessary to dispense and restock inventory, it also dramatically increased the number of discs (from 100 to 700+)[32] that could be stored within a kiosk. In addition, the software, designed and developed by Enterprise Logic Systems,[33][34] was also innovative that it allowed RedBox to remotely monitor and manage inventory at all kiosks throughout the country.

A Redbox barcoded DVD tray, delivered by and returned to the kiosk.
Back of a Redbox Blu-ray tray; with a Men in Black 3 disk

The company's typical self-service vending kiosk combines an interactive touch screen and sign. It uses a robotic disk array system containing a stacked carousel of DVDs[35] and web-linked electronic communications. Kiosks can be located indoors or out and can hold more than 600 DVDs with 70–200 titles, updated weekly.[36] The kiosks are built as modules, and in areas with higher sales figures, a second machine can be connected to the first one in order to offer a wider selection. The customer pays with a credit card or debit card. 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.[37] 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.[38]

A Redbox kiosk rents its average DVD 15 times at an average of $2 per transaction plus any applicable taxes.[14]

Movie studio lawsuits[edit]

With growing concern in 2009 that DVD kiosks might jeopardize movie studio income from DVD sales and rentals, three major movie studios, 20th Century Fox, Warner Bros., and Universal Studios, separately refused to sell DVDs to Redbox until at least 28 days after their arrival in stores.[14] Since Redbox’s business model relies upon new releases,[14] and Fox and Warner Bros. 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.[39][40]

Redbox responded by filing lawsuits, first, against Universal in October 2008,[41] then against 20th Century Fox and Warner Bros. in August 2009.[42][43] 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.[44] 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."[39][43] In October 2009, 20th Century Fox and Warner Bros. 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,"[45] and Warner Bros. 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."[46]

Other major studios, Sony Pictures, Paramount Pictures, and Lionsgate signed distribution deals with Redbox.[14] The Walt Disney Company permits third-party distributors to sell to Redbox, but has not entered into a direct relationship with the company.[14] 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,"[47] while Warner Bros. 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."[46]

Redbox entered into an agreement with Warner on February 16, 2010,[48] followed by Universal[49] and Fox[50] on April 22, 2010. In the agreements, which settle Redbox's lawsuits, Redbox agreed to not make available for rental films from these studios until 28 days after their initial home-video releases. Redbox also improved their ability to make available Blu-ray Disc releases from the studio parties.[citation needed]

See also[edit]

References[edit]

  1. ^ Redbox corporate management
  2. ^ Redbox Careers Retrieved Aug. 1, 2013.
  3. ^ "Redbox bringing DVD vending machines to Canada". The Globe and Mail (Toronto). February 8, 2012. 
  4. ^ "Coinstar, Inc. 2013 First Quarter Earnings". April 25, 2013. Retrieved Aug 1, 2013. 
  5. ^ "Coinstar Inc. :: Brands :: Redbox". Retrieved 22 May 2013. 
  6. ^ a b "COINSTAR INC - 10-Q - 20080807 - NOTES_TO_FINANCIAL_STATEMENT". Google.brand.edgar-online.com. 2008-06-30. Retrieved 2011-12-12. 
  7. ^ Redbox Gets Bought: Another Success For Good Service At A Good Price Techdirt
  8. ^ "Redbox surpasses Blockbuster in number of U.S. locations". Kioskmarketplace.com, November 26, 2007. 
  9. ^ "Redbox surpasses 100 million DVD rentals Redbox surpasses Blockbuster in number of U.S. locations". Kioskmarketplace.com, February 2008. 
  10. ^ "Redbox Hits One Billionth Rental". Gigaom.com, September 6, 2010. 
  11. ^ "Info | Redbox Corporate Information". Redbox. Retrieved 2011-12-12. 
  12. ^ Redbox controls 50% disc-rental share
  13. ^ "Six Questions: Redbox's Mitch Lowe". Home Media Magazine. July 31, 2009. Retrieved September 7, 2009. 
  14. ^ a b c d e f Barnes, Brooks (September 6, 2009). "Movie Studios See a Threat in Growth of Redbox". New York Times. 
  15. ^ "Redbox launches Blu-ray rentals". redbox.com, July 29, 2010. 
  16. ^ "Redbox launches program for video game rentals". usatoday.com, June 19, 2011. June 17, 2011. 
  17. ^ "Redbox pays $100 million for NCR's Blockbuster Express". February 6, 2012. Retrieved May 17, 2012. 
  18. ^ "Redbox Completes Blockbuster Express Purchase". CSNews. June 27, 2012. Retrieved June 28, 2012. 
  19. ^ "Redbox Founder Gregg Kaplan Exits Coinstar; Anne Saunders Named Prexy". The Vending Times. August 25, 2012. Retrieved August 26, 2012. 
  20. ^ "Three Cheers! America Rents 3 Billionth Redbox Disc" (Press release). July 30, 2013. Retrieved Aug 1, 2013. 
  21. ^ "JANA Partners Goes Activist on Outerwall (OUTR)". Retrieved October 7, 2013. 
  22. ^ "Hedge funder says sale is possible for this name". Retrieved December 10, 2013. 
  23. ^ "Redbox Chief Saunders Out, Outerwall to Cut 8.5% of Workforce". Variety. Retrieved December 10, 2013. 
  24. ^ Johnston, Casey. "Redbox and Verizon's Netflix competitor goes into alpha test". Ars Technica. 
  25. ^ Hokenson, Christian. "Redbox Instant Streaming Available To Public". HD Report. 
  26. ^ Sawers, Paul (December 12, 2012). "Redbox Instant by Verizon launches its $8/month Netflix rival this month, with 4 majors on board". 
  27. ^ a b Roettgers, Janko. "Why the writing may be on the wall for Redbox Instant". Gigaom. Retrieved 6 October 2014. 
  28. ^ "McDonald’s Orders More McDVD". Home Media Magazine, Holly J. Wagner, May 2, 2005. 
  29. ^ "Redbox names Solectron worldwide manufacturer of DVD kiosks". EMSNOW.com, April 28, 2005. 
  30. ^ "Company Overview of GetAMovie, Inc.". businessweek.com. Bloomberg. Retrieved 3 April 2014. 
  31. ^ "Franz Kuehnrich, Bartlett US". Advameg. Retrieved 3 April 2014. 
  32. ^ "Flextronics and Redbox in Successful Partnership to Build DVD Rental Kiosks". popai.com. POPAI. Retrieved 3 April 2014. 
  33. ^ http://www.youtube.com/watch?v=OG0zwtie4nU
  34. ^ "Biju Kulathakal". forbes.com (FORBES). Retrieved 3 April 2014. 
  35. ^ "SSKA's official show wraps up in Orlando". Kiosks.org, February 20, 2006. 
  36. ^ "Is Redbox friend or foe what to know if you invest in movie industry stocks". paliresearch.com (free registration required). 
  37. ^ "Rise of redbox. Some kiosks are located outside store location in parking areas.". Selfserviceworld.com, Bill Yackey, August 20, 2007. 
  38. ^ "The Lowe-down on Redbox". Videobusiness.com, Marcia Magiera, August 12, 2009. 
  39. ^ a b "Redbox's Lawsuit Now Stands On Only One Shaky Leg as Court Dismisses First Sale Complaint". Pali Research, Richard Greenfield, August 18, 2009 (free registration required). 
  40. ^ "Analyst: Dismissal of Redbox Claims Could Undermine Kiosk Viability." Home Media Magazine, Erik Gruenwedel, October 5, 2009.
  41. ^ "Redbox Files Lawsuit Against Universal." Redbox Press Release, October 13, 2008
  42. ^ "Redbox sues 20th Century Fox over DVD rentals." Reuters, Tom Hals and Sue Zeidler, August 12, 2009.
  43. ^ a b "Coinstar’s Redbox Sues Warner Unit Over Video Terms". Bloomberg News, Sophia Pearson and Phil Milford, August 19, 2009. August 19, 2009. 
  44. ^ "Judge Throws Out Some Redbox Claims in Universal Suit." Home Media Magazine, Chris Tribbey, August 17, 2009.
  45. ^ "Fox Says Redbox Lawsuit is Flawed". Home Media Magazine, Erik Gruenwedel, October 1, 2009. 
  46. ^ a b "Warner Also Seeks Redbox Lawsuit Dismissal". Home Media Magazine, Erik Gruenwedel, October 2, 2009. 
  47. ^ "Redbox Chief: 'We Are an Engine for Industry Growth'" The Wrap, Mitch Lowe, October 2, 2009,
  48. ^ "Warner Bros. Home Entertainment and Redbox Announce a Multi-year Distribution Agreement" (Press release). Redbox, Warner Bros. Home Entertainment. February 16, 2010. Retrieved May 23, 2010. 
  49. ^ "Universal Studios Home Entertainment and redbox Forge Distribution Agreement" (Press release). Redbox, Universal Studios Home Entertainment. April 22, 2010. Retrieved May 23, 2010. 
  50. ^ "Twentieth Century Fox and redbox Announce Distribution Agreement" (Press release). Redbox, Twentieth Century Fox Home Entertainment. April 23, 2010. Retrieved May 23, 2010. 

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