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For other uses, see Red box (disambiguation).
Redbox Automated Retail, LLC
Company typeSubsidiary of Coinstar
IndustryRetail/DVD rental
Founded2002
HeadquartersOakbrook Terrace, Illinois, United States
Area served
North America
Key people
Mitch Lowe, President of Redbox Gregg Kaplan, Founder of Redbox, CEO of Redbox (2002-2009), COO & President of Coinstar, Inc. (2009-Present)
Websiteredbox.com

Redbox is an American company that specializes in the rental of DVDs, Blu-ray Discs, and video games via automated retail kiosks. As of the end of June 2011, Redbox had over 33,000 kiosks in over 27,800 locations.[1]

Kiosks feature the company's signature red color and arched top surface, visible in the corporate logo, and are located across the United States at grocery stores, pharmacies, mass retailers, convenience stores, and fast food restaurants. The company announced in February 2012 it will set up a few hundred kiosks in Canada in the coming months to aid in its decision on whether to jump fully into the Canadian market.[2]

A subsidiary of Coinstar Inc., Redbox had 34.5% market share of discs rented, as of Q2 2011, as stated by the NPD Group.[3]

History

Redbox Automated Retail LLC was initially funded by McDonald's Corp. In 2002, the company placed four automated convenience store kiosks, that sold grocery items such as milk, eggs, and sandwiches, and 11 DVD rental kiosks in Washington Metropolitan Area locations. While Redbox withdrew the grocery kiosks within a year, the DVD-rental kiosks it had also installed in the area succeeded, and the company changed its focus to that market. In 2005, Coinstar bought 47 percent of the company for $32 million.[4] In early 2008, Coinstar exercised an option to increase its share from 47% to 51%[4]. In February 2009, Coinstar paid McDonald’s and other shareholders between $169 and $176 million for the remainder of the company.[5]

The company passed Blockbuster in 2007 in number of U.S. locations,[6] passed 100 million rentals in February 2008,[7] and passed 1 billion rentals in September 2010.[8] Competitors include Netflix and Blockbuster (Dish Network). As of Q2 2011, kiosks currently have 36 percent of the disc rental market, with 38 percent 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.[9]

Mitch Lowe joined Redbox in 2003 after spending 5-years as a co-founder 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.[10] Lowe had experimented in 1982 with a short-lived VHS movie vending company named Video Droid.[11] 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 was available across the Redbox network by the fall of 2010.[12] 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.[13]

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 will enter into a supplier arrangement where they will purchase product and services from NCR.[14] On June 27, 2012, Redbox sent an email to its customers announcing that it had completed the purchase of Blockbuster Express on June 23.[15]

Kiosk design and operation

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 their Denver and other test markets.[16] 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.[17]

A Redbox barcoded DVD tray, delivered by and returned to the kiosk.

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[18] 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.[19] 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.[20] 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.[21]

A Redbox kiosk rents its average DVD 15 times at an average of $2 per transaction plus any applicable taxes.[11] There are kiosks located in most popular monuments and attractions from the Empire State Building in New York City to the Willis Tower in Chicago. An easy way to find the closest Redbox is by visiting Redbox.com or downloading the Redbox app on a smartphone.[22]

Movie studio lawsuits

With growing concern in 2009 that DVD kiosks may jeopardize 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.[11] Since Redbox’s business model relies upon new releases,[11] 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.[23][24]

Redbox responded by filing lawsuits, first, against Universal in October 2008,[25] then against 20th Century Fox and Warner Bros. in August 2009.[26][27] 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.[28] 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."[23][27] 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,"[29] 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."[30]

Other major studios, Sony Pictures, Paramount Pictures, and Lionsgate signed distribution deals with Redbox.[11] The Walt Disney Company permits third-party distributors to sell to Redbox, but has not entered into a direct relationship with the company.[11] 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,"[31] 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."[30]

Redbox entered into an agreement with Warner on February 16, 2010,[32] followed by Universal[33] and Fox[34] 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

References

  1. ^ "Coinstar Inc. Q2 2011 Earnings Release". July 28, 2011. {{cite web}}: Cite has empty unknown parameter: |1= (help)
  2. ^ "Redbox bringing DVD vending machines to Canada". February 8, 2012. {{cite web}}: Cite has empty unknown parameter: |1= (help)
  3. ^ "Coinstar Inc. Q2 2011 Earnings Presentation". July 28, 2011. {{cite web}}: Cite has empty unknown parameter: |1= (help)
  4. ^ a b "COINSTAR INC - 10-Q - 20080807 - NOTES_TO_FINANCIAL_STATEMENT". Google.brand.edgar-online.com. 2008-06-30. Retrieved 2011-12-12.
  5. ^ Redbox Gets Bought: Another Success For Good Service At A Good Price Techdirt
  6. ^ "Redbox surpasses Blockbuster in number of U.S. locations". Kioskmarketplace.com, November 26, 2007.
  7. ^ "Redbox surpasses 100 million DVD rentals Redbox surpasses Blockbuster in number of U.S. locations". Kioskmarketplace.com, February 2008.
  8. ^ "Redbox Hits One Billionth Rental". Gigaom.com, September 6, 2010.
  9. ^ "Info | Redbox Corporate Information". Redbox. Retrieved 2011-12-12.
  10. ^ "Six Questions: Redbox's Mitch Lowe". Home Media Magazine. July 31, 2009. Retrieved September 7, 2009.
  11. ^ a b c d e f Barnes, Brooks (September 6, 2009). "Movie Studios See a Threat in Growth of Redbox". New York Times.
  12. ^ "Redbox launches Blu-ray rentals". redbox.com, July 29, 2010.
  13. ^ "Redbox launches program for video game rentals". usatoday.com, June 19, 2011. June 17, 2011.
  14. ^ "Redbox pays $100 million for NCR's Blockbuster Express". February 6, 2012. Retrieved May 17, 2012.
  15. ^ "Redbox Completes Blockbuster Express Purchase". CSNews. June 27, 2012. Retrieved June 28, 2012.
  16. ^ "McDonald's Orders More McDVD". Home Media Magazine, Holly J. Wagner, May 2, 2005.
  17. ^ "Redbox names Solectron worldwide manufacturer of DVD kiosks". EMSNOW.com, April 28, 2005.
  18. ^ "SSKA's official show wraps up in Orlando". Kiosks.org, February 20, 2006.
  19. ^ "Is Redbox friend or foe what to know if you invest in movie industry stocks". paliresearch.com (free registration required).
  20. ^ "Rise of redbox. Some kiosks are located outside store location in parking areas". Selfserviceworld.com, Bill Yackey, August 20, 2007.
  21. ^ "The Lowe-down on Redbox". Videobusiness.com, Marcia Magiera, August 12, 2009.
  22. ^ "Facts About Redbox". Redbox Automated Retail. Retrieved 04/01/2011. {{cite web}}: Check date values in: |accessdate= (help)
  23. ^ 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).
  24. ^ "Analyst: Dismissal of Redbox Claims Could Undermine Kiosk Viability." Home Media Magazine, Erik Gruenwedel, October 5, 2009.
  25. ^ "Redbox Files Lawsuit Against Universal." Redbox Press Release, October 13, 2008
  26. ^ "Redbox sues 20th Century Fox over DVD rentals." Reuters, Tom Hals and Sue Zeidler, August 12, 2009.
  27. ^ a b "Coinstar's Redbox Sues Warner Unit Over Video Terms". Bloomberg News, Sophia Pearson and Phil Milford, August 19, 2009. August 19, 2009.
  28. ^ "Judge Throws Out Some Redbox Claims in Universal Suit." Home Media Magazine, Chris Tribbey, August 17, 2009.
  29. ^ "Fox Says Redbox Lawsuit is Flawed". Home Media Magazine, Erik Gruenwedel, October 1, 2009.
  30. ^ a b "Warner Also Seeks Redbox Lawsuit Dismissal". Home Media Magazine, Erik Gruenwedel, October 2, 2009.
  31. ^ "Redbox Chief: 'We Are an Engine for Industry Growth'" The Wrap, Mitch Lowe, October 2, 2009,
  32. ^ "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.
  33. ^ "Universal Studios Home Entertainment and redbox Forge Distribution Agreement" (Press release). Redbox, Universal Studios Home Entertainment. April 22, 2010. Retrieved May 23, 2010.
  34. ^ "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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