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In most businesses, the occasional price increase is expected. In the bargain business, however, even the slightest uptick in prices can cause serious customer blowback. It happens every time the fast food places adjust their $1 menus, and if Redbox isn’t careful, it might just happen to the discount rental kiosk pioneer.
Today, Redbox announced a slew of price increases that will affect DVDs, Blu-rays and video games. According to Deadline, the DVDs will increase in price from $1.20 to $1.50. The Blu-rays will move from $1.50 to $2.00 and the video games will change from $2.00 to $3.00. That might not represent a ton of movement in actual price, but as a percentage of what customers used to pay before, it’s a gigantic increase. The question is whether or not people will pay for it.
There’s no question renting a movie off On Demand is far easier than getting in a car, driving to Redbox, pulling out a credit card, renting a movie, driving home, watching it, driving back to the Redbox and dropping it off. The hassle was worth it for a lot of people in order to save $5.00 or more. Unfortunately, every time Redbox’s price creeps a little bit closer to what On Demand charges, a percentage of consumers are going to decide it’s just not worth it. If that percentage for this price increase is 2%, then it was a probably good decision. If it’s 50%, then it’s obviously a disaster.
The long-term prospects of Redbox, as a viable brand, is very uncertain. The service posted disappointing numbers in the third quarter, and with prices set to slowly change between now and the beginning of January, the number of total rentals isn’t likely to improve. Does this mean Redbox is exclusively destined to be the bridge business between video rental stores and universal streaming that so many expected? Maybe. But even if we all eventually stream off combo TV-Computers, that likely won’t happen for a number of years. So, for now, the company might as well keep making money while it can.
Years from now, we could eventually see a return to Blu-rays in the same way some music fans are now returning to vinyl. I’m not sure there’s the same sound dynamic going on there, but the thought of browsing through aisles and aisles of random movies, offering the chance to discover an unknown gem may be appealing. Given the limited kiosk selections, Redbox doesn’t offer that benefit, but given how quickly the business has grown, there clearly still is a need for the services.
We’ll keep you updated on how Redbox’s numbers look after the price changes.
Image Credit: Redbox