Redbox (Group 4: Terri Garfoot, Jeremy Moritz, Kellon Whitley, & Josh Wooden )
Redbox is the latest movie rental option for consumers which originally started in McDonald’s. In 2009 Coinstar, Inc. purchased all rights of Redbox from McDonalds and currently has more than 31,800 kiosks nationwide with approximately 500 DVDs in each kiosk. Instead of going into a typical Blockbuster, consumers can rent a movie at any time of the day at the nearest Redbox kiosk for only $1 per movie per day without a monthly subscription. Redbox also offers online viewing of movies available at the nearest kiosk and allows the consumer to hold movies.
Technology
The distributing mechanism works exactly like a vending machine but uses a credit/debit card instead of coins. Although the kiosk itself is nothing revolutionary, the technology to maintain the kiosks is sophisticated. Every Redbox is connected to a single information database via internet DSL or a cellular modem where it collects, sends, and stores the data it gathers. Using that data, management can determine how to most effectively and efficiently stock the specific kiosk. IT also plays an essential role in maintaining the kiosks. Field Agents are deployed to kiosks for maintenance if necessary; however, Redbox is equipped with technology to solve simple, routine problems when they arise. For example, the agent can use his/her laptop computer to manipulate the mechanism holding DVDs in place to try to release stuck DVDs.
Competitive Advantage Provided by the Technology
Using Porter’s Competitive Forces Model, Redbox has two main competitors, Netflix and Blockbuster. New market entrants are always a concern in the entertainment industry. Redbox holds a major competitive advantage over any new entrants because of their market saturation. New entrants will likely find it difficult to gain any traction as it pertains to the kiosk rental business model. Substitute services are currently the biggest threat to Redbox due to Blockbuster’s Express kiosks and Netflix’s online streaming. Redbox customers report very high customer satisfaction due to kiosk availability and offering low-cost rentals. Redbox has a key competitive advantage with its suppliers as contacts are in place with Warner Brothers, Universal Pictures, and 20th Century Fox to provide low-cost DVDs.
Challenges
In response to Redbox, Blockbuster launched its own rental kiosk, Blockbuster Express which currently has approximately 9,000 kiosks with approximately 1,400 DVDs in each. To ensure the ongoing success of its business model, Redbox has been expanding the products offered to include Blu-Ray and video games and will eventually begin selling DVDs and streaming movies online similar to Netflix.
Ethical, Social, and Legal Issues
Redbox’s rise has occurred as Blockbuster and other brick-and-mortar businesses have steeply declined, due in no small part to the cheaper alternative for DVD rentals that Redbox has presented.
The movie industry has felt the effects of Redbox on its sales of DVD new releases. To protect their DVD sales, three major movie studios (whose titles constituted in excess of 60% of Redbox’s revenue) delayed selling DVD new releases to Redbox in 2009. Redbox responded to this delayed availability by suing the studios for antitrust violations. The parties subsequently settled (terms undisclosed), with Redbox agreeing to not offer DVDs from these studios until 28 days after their release dates.
Global Issues
Redbox’s ever growing demand and popularity have swept the nation offering an affordable, easy to use movie and game rental system. However, not all foreign nations have the average income that Americans have. As a result, Redbox would struggle significantly to succeed in the market, kiosks would not be available, and the gap between privileged and underprivileged nations would not be bridged.
University Of Wisconsin - Whitewater
Technology
The distributing mechanism works exactly like a vending machine but uses a credit/debit card instead of coins. Although the kiosk itself is nothing revolutionary, the technology to maintain the kiosks is sophisticated. Every Redbox is connected to a single information database via internet DSL or a cellular modem where it collects, sends, and stores the data it gathers. Using that data, management can determine how to most effectively and efficiently stock the specific kiosk. IT also plays an essential role in maintaining the kiosks. Field Agents are deployed to kiosks for maintenance if necessary; however, Redbox is equipped with technology to solve simple, routine problems when they arise. For example, the agent can use his/her laptop computer to manipulate the mechanism holding DVDs in place to try to release stuck DVDs.
Competitive Advantage Provided by the Technology
Using Porter’s Competitive Forces Model, Redbox has two main competitors, Netflix and Blockbuster. New market entrants are always a concern in the entertainment industry. Redbox holds a major competitive advantage over any new entrants because of their market saturation. New entrants will likely find it difficult to gain any traction as it pertains to the kiosk rental business model. Substitute services are currently the biggest threat to Redbox due to Blockbuster’s Express kiosks and Netflix’s online streaming. Redbox customers report very high customer satisfaction due to kiosk availability and offering low-cost rentals. Redbox has a key competitive advantage with its suppliers as contacts are in place with Warner Brothers, Universal Pictures, and 20th Century Fox to provide low-cost DVDs.
Challenges
In response to Redbox, Blockbuster launched its own rental kiosk, Blockbuster Express which currently has approximately 9,000 kiosks with approximately 1,400 DVDs in each. To ensure the ongoing success of its business model, Redbox has been expanding the products offered to include Blu-Ray and video games and will eventually begin selling DVDs and streaming movies online similar to Netflix.
Ethical, Social, and Legal Issues
Redbox’s rise has occurred as Blockbuster and other brick-and-mortar businesses have steeply declined, due in no small part to the cheaper alternative for DVD rentals that Redbox has presented.
The movie industry has felt the effects of Redbox on its sales of DVD new releases. To protect their DVD sales, three major movie studios (whose titles constituted in excess of 60% of Redbox’s revenue) delayed selling DVD new releases to Redbox in 2009. Redbox responded to this delayed availability by suing the studios for antitrust violations. The parties subsequently settled (terms undisclosed), with Redbox agreeing to not offer DVDs from these studios until 28 days after their release dates.
Global Issues
Redbox’s ever growing demand and popularity have swept the nation offering an affordable, easy to use movie and game rental system. However, not all foreign nations have the average income that Americans have. As a result, Redbox would struggle significantly to succeed in the market, kiosks would not be available, and the gap between privileged and underprivileged nations would not be bridged.
University Of Wisconsin - Whitewater
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