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Last night I watched the movie “Crazy Heart”, which we rented from a Redbox at the local grocery store. I won’t go overboard and call Redbox the perfect movie rental experience, but it is I think a nice step forward and underlines the inefficiency of the traditional movie rental store. Let’s start with some simple pro/cons:
- Redbox takes up very little space (or real estate). It’s efficient in that regard.
- The rentals are $1/night, which strikes me as just about right for something that is contained on such a low cost media format like DVD.
- Redbox had all of the new releases and very few older titles. Having the new releases allows it to cover the gap of the Netflix experience, which is that sometimes you want to watch a movie on short notice and Netflix requires you to plan in advance.
- There are no late fees. Redbox just keeps charging me $1/night until I return the movie.
- Now for the cons. In my local grocery store there was just one Redbox, which resulted in a line being created, and some amount of anxiety as you go through the titles looking for what you want. You don’t want to delay anybody else, so you feel the need to hurry. I’m sure this could be solved by adding a second Redbox.
- Because the titles are fairly limited, you really only want to use Redbox when you are interested in a new release. Perhaps a way to address this would be if Redbox were wired to the internet and could download and burn titles in 20 minutes or something. You could order the DVD when you get to the store, complete your shopping and then come back for it when you are done. Another more intermediate solution is that the Redbox could always contain the IMDB Top 100.
It seems an obvious match if Netflix were to acquire Redbox. I think it would protect Netflix’s position in the video rental business. Streaming isn’t going to be perfect for some time, so Netflix needs to cover the intermediate space between consumers that want to watch a movie right now, and the Netflix service.
The combination of Netflix and Redbox (I am a Netflix subscriber, but had no problem paying $1 for a movie that I could watch last night) illustrates that sometimes to kill an industry leader (Blockbuster) there is no single magic bullet. Sometimes the combination of two innovations will kill an industry leader. I know Blockbuster has a program that is similar to Netflix and has the added advantage of being able to return DVDs in stores, but it looks like the video rental giant is on its last legs despite that change to their business.
The rise of Netflix, and even the existence of Redbox, provide support to my point made last week that industry leaders can be displaced against almost impossible odds because the industry leaders are usually so focused on maintaining existing profit centers and business practices. When Netflix was started, doesn’t it seem likely that somebody said “Wait, what if before we are even up and running, Blockbuster starts a similar service and crushes us with their existing advantages?” It seems a logical objection, and yet Blockbuster ignored the threat until the game was over. Even the existence of Redbox is problematic for people who would argue that it’s difficult to impossible to dethrone an industry leader. Shouldn’t Blockbuster have focused on a similar concept as soon as DVDs, and their small physical footprint, replaced VCR tapes? Wouldn’t it have been the ultimate innovation to allow them to grow their margins? If they had done it, we would probably be renting from Blockbuster machines in the grocery store for $3/night, because there would be no reason for Blockbuster to rent the movies for less. But they didn’t do anything. It’s almost shocking to think about.
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Stop the obsession with CoStar. let go now.
Netflix rules, streaming is the future. Get a HDMI cable.
I love the streaming Netflix service, but they do not have DVD commentaries. I love DVD commentaries, so I hope they eventually add that feature.
Also, I think the point I'm referring to above is much larger than Costar. Note I didn't mention them by name. The point I'm really getting at is constant change. Things are always changing and while we as humans are conditioned to expect that the future will be the same as the past (when markets are going up, they will continue to go up, when markets are down, they will stay down), that is not the case. So we have to open our eyes to the examples of change in order to anticipate future disruptions.
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[...] Redbox, Netflix аחԁ tһе Death οf Video Rental Stores « Marketwi.se [...]
[...] This post was mentioned on Twitter by Commerce Real Estate, Bo Barron, CCIM, Scott Stinson, Barbi Reuter, John Reeder and others. John Reeder said: blog post: Redbox, Netflix, and the Death of Video Rental "Stores" http://bit.ly/94lfrx [...]
John;
I love Redbox, and their online tool is great because you can go online and see if the movie you want is going to be at that Redbox before you get to the grocery store, and if it's there you can reserve it. If it's not there you can map out the closest Redbox that has that title and see if its worth the trip.
Theoretically, you could be in a line for a Redbox, and hear the guy in front of you say that he wants to rent the movie you're dying to see, then jump on your smartphone and reserve it before he gets to the Redbox, which would kill that anxiety you were talking about…haha… great post, now what to do with those soon to be vacant Hollywood Video's and Blockbuster's…
Nice. I'll have to check that feature out.
Is there any way to fax your reservation to Redbox?? Kidding.
[...] Redbox, Netflix and the Death of Video Rental Stores « Marketwi.se [...]
did you short the stock while all this was taking place? No, you didn't do anything? Well, that's almost shocking to think about
I'm not defending crappy management, but just saying….
Note, I didn't short the sucker either….
Point taken. Monday morning quarterbacking for sure.
Also, I think I would let Blockbuster and others off the hook by saying that I think their behavior is closer to the norm, and that the industry leader who can address sea changes would be the exception.
I did own Netflix, but sold way too early. The current netflix valuation is scary tho.
Magic Subscriber…
I found your entry interesting do I’ve added a Trackback to it on my weblog
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i think it makes sense for netflix to acquire redbox. that said, ill never use a redbox. ill happily stream netflix. im getting lazy to the point where even mailing/inserting a dvd is too much when i can click a couple buttons while im doing something else. and i have 2 screens on top of each other, so i can do two things at once.
[...] Opportunity Posted on June 4th, 2010 by Deal Junkie Just to follow up on John’s earlier post, here is an excellent Netflix presentation about the future of their business. I’ve been a [...]
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