When Redbox announced last week that it had cut 28-day new release delay deals with its erstwhile enemies, Fox and Universal, consumers and investors alike wondered what the ramifications would be to Redbox’s business. Would the customers keep coming?
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What about Coinstar’s share price? Now that the dust has settled a bit, CNN Money has run a story chronicling Redbox’s troubles with the former Hollywood Three in which several analysts offer their opinions on the matter.
Steve Frankel, an analyst with Brigantine Advisors, believes that though it may lose a few new release-seeking customers, Redbox should do fine under the new delays. Opined Frankel:
“The price and convenience of Redbox is still attractive to consumers . . . Netflix also has a 28-day wait, but while 70% of Netflix’s demand is for older titles, 100% of Redbox’s demand is for new titles. Some of the savvier Redbox customers are going to be disappointed.”
According to the story, another reason that Redbox may not shed too many renters is the fact that “many customers aren’t aware of when DVDs are released, and 60% of Redbox’s titles will still be available the same day that they are available for purchase or rent at Blockbuster”.
Regarding Redbox parent Coinstar’s share price in the fallout from the deals, Craig-Hallum Capital analyst Robert Evans says that it will take time to reveal the full impact of the agreements on Redbox’s bottom line. Said Evans:
“The stock will trend positive in the near term, since the lack of clarity on the supply of DVDs was a great overhang . . . But we’ll need to see the impact of the 28-day delay in the next couple quarters to tell where the stock is ultimately going to go.
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Your turn, Insiders. Will these deals ultimately pay off for Redbox, or are they short-sighted moves that will come back to haunt the company (along with its customers and investors)?
(via CNN Money)
The sad fact is Redbox didn’t have much choice but to go ahead and make these almost one-sided deals. Their “work-around” had to be costly and it still didn’t put enough copies in the kiosks to meet customer demand. At least now they can have plenty of copies to rent. I also believe that the average renter these days has no clue when a certain title is going to be released and/or will gladly wait the 28 days to rent it for only a dollar.
I have Netflix and I use redbox and I am disappointed about the wait.
whoever thought people were unaware about the release dates of movies are wrong if there is something you want to see you pay attention. I am not going out and buying a $25.00 movie if I don’t even know if I will like it! The wait really is a pain because thats why I join Netflix, but I go to redbox and get the new movies I haven’t been able to get shipped yet, other than that I borrow new movies from friends that I can’t get from either of the two.
It will hurt Redbox on the bigger titles that are advertised on TV. Consumer awareness on those titles is much higher.
Redbox will still serve a niche in the market though.
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Waiting the 28 days is no big deal. More dvds are available. Case in point….I just looked to see if Sherlock Holmes was available. It was at almost every kiosk around. I am fortunate that between work and home I have a choice of at least 10 kiosks to choose from.
On another subject…I tried to find(and I had to do a search) a Blockbuster kiosk and there were 5 in my area….closest being 12 miles away up to 20.
RedBox rules!!
This makes me so angry. I look forward to DVD Tuesday and I’ll now start going elsewhere. May switch to some online sites like blockbuster.
Blockbuster Online hardly has movies available, and they never have new movies to rent. Compare that to Netflix, who usually has dvds available. Although I will say that I like BB Online’s envelopes better than the Netflix ones.
If you wait a couple months for the movie to come out on DVD what will it hurt to wait another month?
It’s sad that Bloatbuster couldn’t compete, so the big Hollywood studios and the once-mighty and long outdated business model Bloatbuster employ ganged up on the ever-growing Redbox and their superior business model and price point. Isn’t the whole point of capitalism to compete to win the most customers and in the process make the most $$$? BB KNEW they couldn’t compete so they found a way to make sweetheart deals with three of the major Hollywood studios to somewhat cut off the strong legs of Redbox. Redbox may be down, but if Bloatbuster and Hollywood think they’ve killed Redbox they’re badly mistaken. Make the studios and Bloatbuster sweat by waiting to rent the DVD from Redbox. That’s the only way that neither one gets their way. Bloatbuster reminds me of a kid that cries and screams in the store for a toy, and to shut the kid up, the parent buys the kid the toy. Same scenario here. Also, Bloatbuster is giving Redbox and Netflix free publicity by putting their brand names on their store posters. Remember, ANY PUBLICITY IS GOOD PUBLICITY!
If Redbox had been willing to pay the same as Blockbuster for their product then they could have kept the same deals as Blockbuster.
Redbox wanted to be the cheap guy and get their product cheaper than anyone else. The studios said no. End of story.
No. Redbox was willing to pay for the copies, they were still going to rent it for $1.00/night. That was the problem….the studios think that cheap rentals and easy access to those cheap rentals is killing their retail business and devaluing their product. It wasn’t the amt of money RB was offering the studios, it was the amount of money they were asking the consumer to pay for the rental. heck- Redbox was buying copies of major releases at retail prices- surely they aren’t opposed to paying rental wholesale costs.
Aiden,
You have absolutely NO idea what you’re talking about.
ok, so then what do YOU think the story is?
The story has been told many a time on this board. Have a read through and edumacate yourself.
I thought Blockbuster had with the Studio’s a percentage on the rental of BB movies in return for lower price dvd’s. If now BB, has $1 a day (4 or 5 days term) like $1 a day Redbox rental, I don’t see why Redbox can’t get that same deal. Any idea’s why Hollywood is not offering a percentage deal to Redbox or if they did?
NR rev-sharing deal only covers the initial rental price. Extra days are free. BB sends around $1.50 per rental to the studios (depending on the company).
If Redbox wanted to send $1.50 per rental to the studios then everything would have been fine.
Or perhaps Redbox wanted to be the ‘cheap’ guy so as to be able to keep their rental prices ‘cheap’ for their ‘cheap’ consumers who somehow understand the concept of ‘a penny saved is a penny earned’….If only Redbox had been willing to ‘get in bed’ with the studios via revenue sharing like BB did– then Redbox could have/would have also charged those $5 rental fees like BB …Oh wait, didn’t BB close the majority of its stores, file for bankruptcy or something…..Hmm, guess those $5 rentals didn’t work out too well in the long run….And the studios were really counting on it….revenue sharing and all….
Unfortunately, this will pretty much mean the end of Redbox use for me. With Netflix having pretty much the same deal, I can just move the movies I really want to see to the top of my queue.
This is great news for Netflix. They’ll probably pick up 50% of Redbox’s customer base. Redbox has shot themselves in the foot on this one. The Hardcore fans will pay a couple bucks extra, if they can see the movie a month earlier, just like they paid $15 or more for Avatar in the theater.
This also applies to Netflix so there is no validity to anything you just said.
If you had bothered to read the article, you would read that only 40% of Netflix’s business is based on new rentals, while 60% of it is classic films, so they don’t have the demand for new releases like Redbox does, whose business is based 100% on new rentals. People will rent classic titles at Netflix until the the new ones come out. But because of the limited supply at Redbox, there is nothing to rent, if you don’t have new releases on time.
So you are saying that people prefer to wait for Netflix to get the releases after 28 days than Redbox? I don’t think that the company makes a difference. That’s what I was commenting on. Obviously the majority of Redbox business is new releases, but there is a difference between business percentage, and demand percentage. Of course if you read and UNDERSTOOD the article, you would have caught that. Redbox gets business from used dvds, delayed releases, and the replay movies they get. This is on top of the new releases which they still get. I understand and agree with many of your points but your original comment states they can see the movies through Nexflix sooner than they could through Redbox and that is not a valid statement by any means.
Redbox should have played hardball and told the studios that they would kick them out of their kiosks, if they didn’t negotiate a shorter, maybe 10-day, not a month, delay. By rolling over and taking this, they let Blockbuster and the Studios dictate their practices and kill their customer base.
Yeah, that’s real smart. NOT!
Deals made with Paramount and Lionsgate will insure that there is always something to rent at Redbox. Problem is, is that most “new release people”,
that’s all they want, and don’t care about convenience and price.
For those people, they’ll jump ship and go elsewhere.
Redbox is aware that there loyal consumers will stick with them,
even if it means giving them out a free code now and again
to keep them loyal. :-) But the majority of those who were just
concerned with Tuesday’s new Releases, well, that’s what we call
“CHURN” in the retail industry, and you always count for a
decent amount of “Churn” when calculating your profit /loss.
Just as Netflix did when they throttled people and got “Churn”,
just as when BlockBuster cut out their in store coupons on
it’s mail rentals and raised their prices they got “churn”,
so Redbox is counting on a specific amount of “churn”
when the “New Tuesday People” leave to go elsewhere,
& it settles down to just the hardcore redbox fans.
At that point, watch out studios, you’ll truly see the value of your product….
Just remember, Paramount can opt-out of their deal with Redbox on June 30th, 2010. Look for them to do just that. Why do you think they kept signing 6 month temporary agreements? They were just waiting for the outcomes of the Warner, Universal, & Fox disputes with Redbox.
This is an absolute lock. Disney is looking at things right now too.
I also agree that the point you just brough up will be something interesting to see develop around that June 30th date. As to what will happen, we will soon find out.
and honestly, it still won’t matter.
Whatever Hollywood studios do with their end product is up to them, given “legal” grounds. But it is up to the Consumer’s by buying or not buying their product that determines if Hollywood’s method is profitable. Hollywood has already shown us that they can limit rental competition for 28 days.
What’s next on Hollywoods agenda, to control the digital media and internet?
hmm….like “Nina Paley, director of Sita Sings the Blues, wrote on her blog that she turned down Netflix’s offer to stream the award-winning movie due to the inability to offer the movie without DRM….the studios that are forcing Netflix to use DRM. ” by hackingnetflix
I think this is just hilarious. With movies coming to dvd mere months after their theater runs I am not too worried about a 28 day delay. We used to have to wait much longer for them to come out in the first place. If anything I think I like this. I mean if there’s a 28 day window perhaps this means that when these discs do hit the box they will be less sought after because impatient people who are willing to spend more money will find other ways of renting them.
why does redbox say they have movies when they don’t, they make it look like they have been rented buy someone else, but in reality, they don’t have it for another month (avatar). I use redbox a lot, but lying to keep customers proves they are just a bussiness not looking out for our best interests, but theirs.
Do what? The common person doesn’t know when a video is released? Who the #@$@ figured that one out. When you walk into K-Mart, Walmart, Target, Walgreens, CVS, etc. and see the video sitting right there at the front door you know it has been released !!!! It is like a new car on a car lot, the newest ones get put right in front “see me I’m new.” I think that the release date may be something that people don’t track, but when people see it they want it.