How many people are renting DVDs?

Redbox Statistics
Total number of discs rented out of Redbox per minute 1600 discs
Total percentage of Redbox users who rent another movie upon return 25%
Total impression per week made by Redbox 200 million
Total number of discs dished out by Redbox 2 billion
Number of Redbox locations nationwide 29,000
Number of Redbox movies rented per week 9.5 million
Number of Redbox movies rented per day 1.2 million
Number of Redbox movies rented per hour 54,000
Number of Redbox movies rented per minute 900
Number of Redbox movies rented per second 15
Number of new Redbox’s that opened every minute in 2010 1

 

What is the current state of the dvd rental kiosk industry/market?

Redbox offers DVD rentals for $1 or $1.50 a day (as of June, 2011) at kiosks in more than 27,000 locations in the U.S. Entrepreneurs who own retail spaces, such as restaurants, grocery stores and convenience stores, can contact Redbox to inquire about adding a DVD kiosk to their locations. According to Home Media Magazine, an entertainment industry trade publication, more than 30% of all movies are now rented from a DVD rental kiosk.1

Doesn’t seem like there’s lots of hype among academic sources, most of them are written between 2006 and 2009. Similar situation applies to press releases, there’s a big hole between 2009 and 2012.Redbox itself describes the main benefits as it being convenient, because it has more than 30,000 locations that are usually located in places that have huge traffic. It is also affordable and “fun”. 68% of the population lives within a 5 minute drive of a Redbox location.

The kiosks carry DVD and Blu-Ray releases. While the movies can be reserved ahead of their time, there’s always that 28 day agreement with warner studies.

In 2011, there were 33,300 Redbox dvd kiosks. Supposedly, Redbox accounts for over 80 % of Coinstar revenue.

While Netflix and blockbuster is seemingly passing Redbox in terms of viability, many people still don’t know the difference between a cd and a DVD, let alone streaming movies online. It would be quite appropriate to mention, though, that Redbox is planning to launch its own internet presence alongside Netflix.

Coinstar’s , the main subsidiary’s, stock is on an up-sloping trend. The stock doesn’t seem to be very volatile, with the average price ranging at around 50$. Ever since Coinstar acquired it only 3 years ago, the growth rate has been volatile at times, but never less than 25 %. Perhaps that is because of the unique platform it works on.

The stock price is so low at this point because Redbox DVD rental machines missed the analyst’s estimates. It is justified with the “weak slate” of new films in the home video market and competition for viewers from the summer Olympics.

Despite the supposed drop in publicity, the growth rate numbers of Coinstar are stunning.

The Revenue grew 39 %, 50 %, 25.5% and 28.4 % in 2008, 2009, 2010, and 2011, respectively. Gross Profit as % of revenue deviates around 32, 33 % for the last 3,4 years. Thus, constant growth. However, the earnings for next year are forecasted to grow only 12 %, whereas the profit is expected to come in at around 10 % increase.

CNN says Redbox is “kicking Netflix’s butt”. With the economy being on the downturn(still), a monthly subscription to Netflix seems so much less needed than an occasional $1.20 spent on a movie. “Redbox is more competitive if you only watch a dvd a week, the vast majority of people watch fewer than 3 movies a month.” Redbox gets it DVD movie titles through licensing arrangements with various studios like Paramount, Universal Studios, 20th Century Fox, Warner, Lionsgate, Sony and other studios..

In 2011 Redbox tried to raise its prices 20 % and it seems to have succeeded. Unlike Netflix, its stock climbed right back up from its usual November, December downfall period. As can be seen, their earnings and profit still maintain the same momentum at the moment. I would venture on to say that this is because of a loyal customer base.

As end of the first quarter 2011, Redbox increased its movie rental market share to 33 % from 24%in 2010 first quarter outpacing online retailers like Netflix (NFLX); while brick and mortar businesses lost their market share significantly from 33% to 20%.

 Blue-ray business has not been caught up the speed of DVD rental business. Part of it is consumer price sensitivity for higher prices and also slower adoption of technology.

 

 

How much does it cost to invest in a redbox?

Redbox kiosks can make a few hundred dollars a day. However, it depends on the foot traffic the place receives. The Redbox franchise fee is around $20,000 for the machine, DVDKiosk machine is around $17,000. However, the machine itself costs from $7,000-$10,000. However, keep in mind that Redbox is not currently franchising or leasing their machines – they are simply installing them at suitable locations and charging the owner a commission. So, technically, the machine is still owned by Redbox. Redbox doesn’t franchise its kiosks. All Redbox locations nationwide are owned and operated by Redbox Automated Retail. 

However, there are dividing opinions on this. Apparently, Redbox used to sell (franchise) their machines for a specific cost that varies among businesses and depends on the viability of the business; on top of that, Redbox also individually determines the minimum amount of dvds that should be sold at a specific location in order for the Redbox to be active in their system.

 

How does it work?
Redbox is the fun, fast, easy way to rent the latest new release movies on DVD or Blu-ray Disc® and the top new release and family video games. Featuring up to 200 titles and 630 discs, Redbox is a fully automated video rental store contained in 12-square feet of retail space. More than 68 % of americans live within a five minute drive from the nearest Redbox kiosk.

First, you reserve a movie or a game you’d like to rent. Then a customer needs to head to the nearest Redbox kiosk and pick up his or her rental. The rental then can be returned to any of the 31,500 kiosks nationwide.

The Redbox allows a user to check-out DVDs at a price of $1.20 for one rental day, $1.50 for blu-ray discs and $2.00 for games(subject to tax). For this price the customer can keep the product until for one day until 9 pm next day(subject to timezones and specific conditions of a kiosk.) For each additional day the same amount is charged plus tax. For some items, the minimum rental charge can exceed the conventional pricing conventions. If so, upon return, if extra day charge should be incurred, then the cost is minimum rental charge + 1$. There’s also a maximum rental period – if you keep the item for longer than the maximum period, it becomes yours. However, your card is charged the maximum amount as well. The traditional pricing scheme would go like this:

 

Item: Example Daily Rental Charge: Example Maximum Rental Period: Example Maximum Charge:
DVD

$1.20

20 days

$24.00

Blu-ray Disc

$1.50

23 days

$34.50

Game

$2.00

30 days

$60.00

 

 

How do I make money?

After the Redbox has been installed for a business, the Redbox shares the revenue with the business owner. The contract is struck between Redbox and the business owner, specific details are negotiated between Redbox and the other party. The general trend as to requirements is usually a certain amount of dvd sold every day, a certain amount of revenue shared.

 

What are the qualifications for a redbox business?

To maximize chance of being approved there needs to be at least 15,000 worth in weekly patrons(however, some opinions suggest 50,000), visibility, a prime location to place the machine(around 12 sq. feet).Both indoor and outdoor machines can be installed.

The box doesn’t cost anything per say, only the location real estate. So, essentially, if there’s space to plug it in, it costs 0. If the machine needs troubleshooting, Redbox mobile techs will take care of it.


How much is the redbox commission pay?

The Redbox commission pay varies among businesses, just like the negotiated amount of dvds sold. (applied to each case separately.)

 

Can you sell advertising on a redbox?

The advertisements have to comply with the advertisement policy of Redbox, but yes, advertisement can be sold. The corporate office needs to be contacted, and they evaluate it on a case by case basis. Phone number: 1-425-943-8000. 

Can I set my own DVD rental prices?

No, you may not set your own dvd rental prices. The pricing and marketing strategy is fully dictated by Redbox, likely because it is not franchising or selling its products. However, there are several alternative dvd kiosks that do sell the machines and do let you set your own prices.

 

Do I need any licenses?

No licenses are needed. All the license affairs are being dealt with by Redbox. (Contracts with warner bros., et cetera.) However, if you choose to venture on with your own dvd-kiosk, contracts need to be made individually with most likely each of the big movie distributors.

Also, no separate business licenses or anything – the locations may include convenience store, supermarket, shopping mall, drug store, college, office building, airport, military base, casino or other types.

 

What should be my business model?

 

 

What should be my first step?

First steps should include visiting their sales lead form, providing all the needed information such as personal information, type of business you own, primary goal for adding Redbox to your location, traffic and submitting the application Redbox. Redbox is supposed to contact the applicant after reviewing the application; however, it may take up to a week(customer service rep also said it can take up to a few months for Redbox to get back to a business owner, so it can turn out to be a lengthy process.) Applications can also be made through their customer help e-mail or live customer help chat.

 

What is everything involved in having a redbox?

It is installed and troubleshot by Redbox technicians, but the owner needs to make sure that there’s a power line available for the vending machine.

The Business model consists of providing access to a distributed network of kiosks conveniently located around neighbourhoods(for the most part) to make it easy for customers to pick up and drop off DVDs while they run other errands. This is why the kiosk needs to be up and running 24/7.

Historically Regional supervisors are mainly responsible for stocking each kiosk in their geography, they are also responsible for the maintenance of the kiosks; they had to get to them and then troubleshoot them manually. However, the company Kaseya developed a remote administration system that lets the managers monitor systems health, update software and keep track of equipment of retirement schedules.

The regional manager still needs to be on hand to set up the hardware. Management and software is configured remotely.

 

What is the process in getting a redbox?

Interested business owners need to supply Redbox with the following information first:

Name, Email, State, Zipcode, Location Type, Average Daily Traffic(transactions), Location description.

Contacts skype – 866-Redbox3 or 866-733-2693. This information needs to be put in this non-financial sales lead form – http://www.coinstarinc.com/contact/SalesLead. Additionally, there are several radio box multiple choice questions underneath. DVD Kiosk needs to be checked in order for the application to be directed to the right department.

When applying for a Redbox explain why you believe a Redbox kiosk will do well in your location. Discuss the number of customers who have suggested you get a Redbox installed. Also, measure the distance of the nearest Redbox locations to your business to demonstrate need. Sell yourself. If your business caters to families, and the nearest Redbox location to you caters to adults, point it out as a selling point for family movies.

If the application goes through, then a representative will contact the applicant, advise on the contract process, set you up with mobile technicians and choose an installation date.

 

Does redbox allow units in housing areas or business complexes?

The scope of areas allowed to install Redbox is quite extensive starting from airports and ending with colleges. Consequently, yes, they can be installed in housing areas or business complexes. However, for a peculiar type of location the option “other” should be chosen on the application form.

 

How to get an accepted application for redbox? How long does process take? Are there requirements?

The application process involves the business owner and the rep discussing business opportunities. There really are no requirements as to what the business model of the company/location is, or where it’s at. What matters is how acclaimed a Redbox is in your area, and the most important point is the foot traffic. Some suggest that it needs to be way over 15,000 per week, something closer to 50,000 patrons. Besides that, the most important part of the application is explaining why it would do good at the location you’re suggesting.

 


Do you have to buy movies for Redbox?

No, you do not have to buy movies for a Redbox. The machine itself is stocked with movies and games by regional representatives. Whether it should be stocked is determined remotely, through a proprietary stock monitoring system.

 

 

How do movies get replaced in a Redbox?

A regional manager replaces movies in the Redbox machine when the remote monitoring system notifies him of the need to replace them.

 


Where is the best place to put a Redbox?

The best place to put a Redbox is in a visible place where there is a lot of foot traffic.

 

Do I buy or lease the Redbox?

Redbox does not franchise, sell or lease their machines. This essentially means that there are no acquisition costs for the owner. The only concern of the owner is where to put the machine for maximum profit.

How does Redbox make money?

Redbox’s business model is simple – it installs Redbox vending machines in locations provided by business owners and collects a certain percentage of revenue, sharing revenue with the business location provider.


What are the hassles of having a redbox?

There are no significant hassles involved in owning a Redbox. Maintenance is done by the Redbox maintenance staff, so is troubleshooting. Re-stocking is performed by Redbox managers as well. If only perhaps managing the available space around it during heavy traffic, because customers occasionally complain about the long queues.

Is it too late to get into the Redbox business?

Absolutely not. The usage of Redbox is only rising with every year, thus, illustrating how in-demand the service is. Considering the volumes of DVDs that Redbox rents out every second, there is definitely huge demand for such a service. Rather counter-intuitively, the DVD kiosk industry continues to rise (as witnessed by Coinstar’s huge growth numbers) despite plenty of alternative streaming offerings such as Netflix. However, Redbox is planning to tap into this source of revenue as well, making Coinstar stronger and stronger. While there are other options such as buying your own DVD Kiosk, Redbox has already become a reputable brand in the eyes of the customers, not to mention it’s publicized agreements with Warner Bros. Additionally, the business model is built to be very sustainable – it’s hard to run out of space when the USA is so large and the vending machine only takes about 12 square feet.

The main competitor in substitute products is Netflix, which has experienced a lot of streaming problems lately and who’s technically not even satisfying the same need or targeting the same audience. Also, Redbox has the upper hand here because it is technically not tied to WB supplying them with dvds – it could buy them at regular retail stores, whereas Netflix has a business model that’s more complicated(dependencies on movie studios, et cetera.)

 


How many movies are you expected to rent?

The amount of movies expected to rent varies depending on the individual contract signed with each employer.

 

How to pass redbox screening?

Judging from the data provided by the Redbox locator, it is not as much about the spot or the promise of return, but rather about the reputation and overall size of the organization. Companies most often found on the list are Walgreens, Walmrt, Hannaford, Familly Dollar, PriceRite et cetera. This leads to the conclusion that Redbox prefers chains of stores rather than local supermarkets or grocery stores.

 

Where do the dvd’s come from?

The DVDs are delivered to the machine by the regional manager. As for higher up the chain – Redbox is in an agreement with Warners Bros. that allows them to distribute their media through their vending machines. However, Warner Bros. don’t possess much influence due to the fact that Redbox could easily just buy the DVDs from retail stores; that is why Redbox had such huge bargaining power in the 28/56 day delay affair.

 

How to explain why you believe a Redbox kiosk will do well in your location?

The main attraction for Redbox seems to be the foot traffic your store receives. Redbox estimates the needed amount at 15,000 per week, however, some mention estimates as high as 50,000. The location needs to have an open space where Redbox is clearly visible and it needs to have a lot of traffic. Also, the proximity of another DVD kiosk is important as well as the type of demographics taking advantage of the location.


What do you do if the machine malfunctions?

The location owner does not do anything. According to Redbox, they have a remote monitoring system installed, meaning, when the store owner discovers the malfunction, Redbox is likely to already know about it. After a malfunction is reported, a technician is sent to the location.