Redbox, the video rental company known for their prolific $1 per night DVD kiosks, has announced that they are developing an online strategy to compete with major rival Netflix. Mitch Lowe, President of Redbox, said in an interview this week that the company is considering the possibility of a web-based service to expand movie selection beyond what can fit in their kiosks.
Currently, Redbox owns approximately 24,000 DVD kiosks across the United States, and keeps a library of only around 200 titles.
Lowe, who worked for Netflix until 2002, believes that Redbox has been losing business to Netflix when customers turn to them for older titles. In comparison to the small Redbox kiosk selection, which consists primarily of new releases, Netflix offers 20,000 older titles via their online service and over 100,000 by mail.
“The way we look at it is, how can it help us deliver to our customers things we can’t do in our kiosks?” said Lowe during the interview. “What role might it play in expanding our selection?”
It’s not yet clear whether Redbox will pursue a download service, streaming rentals, a mail-order queuing service similar to the original Netflix model, or a combination of these services. Streaming or downloading films seem like a logical first step though, if Redbox wants part of an estimated 7 million Netflix customers who currently watch movies on various online devices.
Some are speculating that Redbox could partner with an established digital media provider such as Sonic Solutions to help them along. A company like Sonic, who already owns licensing for several thousand titles, could also be instrumental in negotiating with movie studios regarding rights for online viewing.
Even if they decide to go the digital route, you shouldn’t be losing any of your local Redbox kiosks anytime soon. Lowe says that he doesn’t expect that physical rentals will drop, especially with the increasing popularity of Blu-ray movies, which have recently begun appearing in some kiosks for $1.75 per night.
Redbox has a long road ahead of them if they plan to pursue online streaming. As Netflix revealed a few months ago, streaming content costs more than physical DVDs due to licensing fees. The cost and time associated with negotiating digital rights with studios, however, could be well worth it to tap into a customer base that is millions strong and growing rapidly.
