Why Redbox Is Having Serious Problems
Since the advent of the VCR, movie rentals have been big business. Once upon a time, there were VHS rental stores all over the place. Then, most of them were supplanted by the behemoth that was Blockbuster Video. Blockbuster itself eventually faded into obscurity but now one of the companies that helped make that happen, Redbox, appears to be seeing the early stages of the cycle repeating itself once again, only this time it looks like they’ll be the one going the way of the dodo.
Outerwall, the parent company that owns Redbox, has announced that their revenue for the fourth quarter of 2015 dropped by 17% as total movie rentals have fallen by nearly a quarter year-over-year. Outerwall admits that this is not an isolated drop. According to Variety, they expect rentals to decline an additional 15%-20% in 2016. They’ll also be reducing the total number of Redbox kiosks by as much as 2,000 units, though this will still leave more that 35,000 of the kiosks in service.
Many of the reasons that Redbox is in decline are obvious. While the company does blame "successive quarters of weak content," which is to say that there just weren’t movies people wanted to watch, as well as their own price increase in December 2014, which increased the cost of a standard DVD rental by 30 cents to $1.50, there’s a much more obvious reason that business is shrinking.
In much the same way that companies like Redbox and Netflix sped up the demise of the brick and mortar rental store, online streaming and video on demand are doing the same thing to Redbox. Between Netflix, Hulu, iTunes and numerous other digital options, Redbox is not nearly as convenient as many other choices. Online options have a much wider selection than a physical box, and many now give you the freedom to not only watch whenever you want, but also wherever you want, as they allow viewing on multiple devices. As technology changes, the old way of doing things simply falls out of favor.
Having said that, not all hope is lost for Redbox. The company is still profitable and their operating margin has increased over the last two years. In addition, Redbox is still a much cheaper option for movie rentals than any VOD service, so it will still be the option of choice for many people looking to save a few dollars on their entertainment.
One analyst says it’s not a question of if people stop renting from kiosks entirely, but only a question of when. Do you still rent from Redbox? Let us know if this is a service you want to see stay around, or if you’ve already given up on them.
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