Redbox Automated Retail, LLC

Type	Subsidiary of Coinstar
Industry	Retail/DVD rental
Founded	2002
Headquarters	Oakbrook Terrace, Illinois, United States
Area served	North America
Key people	Anne Saunders, President of Redbox, J Mitch Lowe, former President Gregg Kaplan, Founder of Redbox, CEO of Redbox (2002-2009), COO & President of Coinstar, Inc. (2009-Present)[1]
Website	redbox.com

Redbox is a subsidiary of Coinstar that specializes in the rental of DVDs, Blu-ray Discs, and video games via automated retail kiosks. As of the end of November 2012, Redbox had over 42,000 kiosks at more than 34,000 locations.^{[citation needed]}

Kiosks feature the company's signature red color and are located at grocery stores, pharmacies, mass retailers, convenience stores, and fast food restaurants. The company announced in February 2012 it will set up a few hundred kiosks in Canada in the coming months to test the Canadian market.^[2]

Redbox had 34.5% market share of discs rented, as of Q2 2011, as stated by the NPD Group.^[3]

History [edit]

Redbox Automated Retail LLC was initially funded by McDonald's Corporation. In 2002, the company placed four automated convenience store kiosks that sold grocery items such as milk, eggs, and sandwiches as well as 11 DVD rental kiosks in Washington Metropolitan Area locations. While Redbox withdrew the grocery kiosks within a year, the DVD-rental kiosks succeeded and the company changed its focus to that market. In 2005, Coinstar bought 47 percent of the company for $32 million.^[4] In early 2008, Coinstar exercised an option to increase its share from 47% to 51%.^[4] In February 2009, Coinstar paid McDonald’s and other shareholders between $169 and $176 million for the remainder of the company.^[5]

The company passed Blockbuster in 2007 in number of U.S. locations,^[6] passed 100 million rentals in February 2008,^[7] and passed 1 billion rentals in September 2010.^[8] Competitors include Netflix and Blockbuster. As of Q2 2011, kiosks currently have 36 percent of the disc rental market, with 38 percent to rent-by-mail services and 25 percent to traditional stores, according to the NPD Group. As of Q2 2011, 68 percent of the U.S. population lives within a five-minute drive of a Redbox kiosk.^[9]

Mitch Lowe joined Redbox in 2003 after spending 5-years as a co-founder of Netflix. At Redbox, he started first as a consultant and then as VP of Purchasing & Operations. In 2005, he became the Chief Operating Officer of Redbox.^[10] Lowe had experimented in 1982 with a short-lived VHS movie vending company named Video Droid.^[11] Mitch Lowe was named President of Redbox in April 2009.

In July 2010, Redbox announced that they were beginning to rent Blu-ray movies at 13,000 kiosks nationwide, and Blu-ray was available across the Redbox network by the fall of 2010.^[12] In October 2010, the company began testing video game rentals in Reno, Nevada; Orlando, Florida; Stevens Point, Wisconsin; Austin, Texas; Wilmington, North Carolina and Corvallis, Oregon. In June 2011, Redbox launched video game rentals nationwide. Games for all major platforms are offered, including Wii, PlayStation 3, and Xbox 360.^[13]

In February 2012, Redbox announced the purchase of former competitor Blockbuster Express (NCR) for $100 million. The acquisition included over 10,000 DVD kiosks, certain retailer contracts, and DVD inventory. As part of the agreement, Redbox will enter into a supplier arrangement where they will purchase product and services from NCR.^[14] On June 27, 2012, Redbox sent an email to its customers announcing that it had completed the purchase of Blockbuster Express on June 23.^[15]

The founder of Redbox, Gregg Kaplan, exits Coinstar as president & COO of Redbox. Anne Saunders is the new president of Redbox.^[16]

Redbox Instant [edit]

Redbox began internally testing its own video streaming service, dubbed Redbox Instant, in July 2012. The service is a joint effort between Redbox and Verizon.^[17] On March 14, Redbox Instant by Verizon officially went public, allowing offering customers a free 1-month trial an $8/month unlimited streaming service that includes 4 disc rentals from kiosks ($1 more for Blu-ray).^[18] The service launched with 4,600 titles from movie companies such as EPIX, Lionsgate, NBCUniversal, Paramount Pictures, Relativity and Sony Pictures. According to earlier reports, Redbox Instant was going allow users download content to mobile devices for offline viewing. ^[19]However, Redbox does not seem to offer downloads at this time. Redbox titles can be rented or purchased, in SD or HD quality. When customers rent a title, they have 30 days to begin watching it and then 48 hours to watch it as many times as they like.

Kiosk design and operation [edit]

A Redbox kiosk.

The carousel of DVDs inside of a Redbox machine.

Redbox began in 2004, using re-branded kiosks manufactured and operated by Silicon Valley-based DVDPlay, at 140 McDonald's restaurants in their Denver and other test markets.^[20] In April 2005, Redbox phased out the DVDPlay-manufactured machines and contracted Solectron—a subsidiary of Flextronics, which also manufactures the Zune, Xbox and Xbox 360—to create and manufacture a custom kiosk design.^[21]

A Redbox barcoded DVD tray, delivered by and returned to the kiosk.

Back of a Redbox Blu-ray tray; with a MIB3 disk

The company's typical self-service vending kiosk combines an interactive touch screen and sign. It uses a robotic disk array system containing a stacked carousel of DVDs^[22] and web-linked electronic communications. Kiosks can be located indoors or out and can hold more than 600 DVDs with 70–200 titles, updated weekly.^[23] The kiosks are built as modules, and in areas with higher sales figures, a second machine can be connected to the first one in order to offer a wider selection. The customer pays with a credit card or debit card. DVDs can be returned the next day to any of the company's kiosks; charges accrue up to 25 days, after which the customer then owns the DVD (without the original case) and rental charges cease. Customers can also reserve DVDs online, made possible by real-time inventory updates on the company's website.^[24] While customers can buy used DVDs from the kiosks (with unsold used DVDs returned to suppliers), Redbox estimates only 1% to 3% of the company's revenue comes from used disc sales.^[25]

A Redbox kiosk rents its average DVD 15 times at an average of $2 per transaction plus any applicable taxes.^[11]

Movie studio lawsuits [edit]

With growing concern in 2009 that DVD kiosks may jeopardize DVD sales and rentals, three major movie studios, 20th Century Fox, Warner Bros., and Universal Studios, separately refused to sell DVDs to Redbox until at least 28 days after their arrival in stores.^[11] Since Redbox’s business model relies upon new releases,^[11] and Fox and Warner Bros. represented 62 percent of home video rental revenue in 2008–09, analysts have said that this “windowing” of new releases by the three studios may make Redbox’s business model unviable.^[26][27]

Redbox responded by filing lawsuits, first, against Universal in October 2008,^[28] then against 20th Century Fox and Warner Bros. in August 2009.^[29][30] In these lawsuits, Redbox has asserted three claims against the studios: copyright misuse, tortious interference and antitrust claims. In August 2009, the federal judge hearing the Universal case rejected the first two claims, but allowed the antitrust claim to continue.^[31] While the judge found sufficient merit in the antitrust claim to allow the case to continue, some independent observers doubt it can succeed, since Redbox "must show that the studios worked together as a cartel... There is little evidence of an industrywide conspiracy."^[26][30] In October 2009, 20th Century Fox and Warner Bros. filed motions to dismiss Redbox's lawsuits against them, with Fox arguing that "antitrust law does not require a seller to provide its product through the distribution channel that the buyer demands, on the date that the buyer demands, or at the price that the buyer demands,"^[32] and Warner Bros. saying that "This is precisely the type of routine business dispute, motivated solely by a merchant’s attempt to protect its profits rather than to protect competition, that the antitrust laws are not meant to address."^[33]

Other major studios, Sony Pictures, Paramount Pictures, and Lionsgate signed distribution deals with Redbox.^[11] The Walt Disney Company permits third-party distributors to sell to Redbox, but has not entered into a direct relationship with the company.^[11] Both sides of the studio lawsuits have pointed to these revenue-sharing deals to shore up their argument, with Redbox President Mitch Lowe saying "our growth can lead to theirs [the studios' growth]. For example, Redbox currently estimates we will pay more than a combined $1 billion over the next five years to Sony, Lionsgate and Paramount to purchase and then rent new release DVDs to consumers,"^[34] while Warner Bros. says the deals are proof that far from being shut out by Hollywood, "Redbox’s business has thrived since its suit against Universal, underscored by lucrative distribution deals with Paramount Home Entertainment, Sony Pictures Home Entertainment, and Lionsgate."^[33]

Redbox entered into an agreement with Warner on February 16, 2010,^[35] followed by Universal^[36] and Fox^[37] on April 22, 2010. In the agreements, which settle Redbox's lawsuits, Redbox agreed to not make available for rental films from these studios until 28 days after their initial home video releases. Redbox also improved their ability to make available Blu-ray Disc releases from the studio parties.^{[citation needed]}

See also [edit]

Companies portal

• Online video rental
• Video store
• Redbox Automated Retail LLC v. Universal City Studios LLLP

References [edit]

External links [edit]

• Official website