Posted July 19, 2010 10:07 pm by with 1 comment

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redboxRemember when Blockbuster was king of the video rental biz? It was a brilliant concept developing at a time when studios were charging $80 for a new movie on VHS. But as DVD took over from VHS and the price point on new movies began to drop, Blockbuster found itself slipping from the top spot and now has become the Betamax of home video rentals – once loved, but now forgotten.

These days it’s Netflix who is wearing the crown with their original concept of offering all the DVDs you want for a flat rate per month (no late fees), delivered right to your mailbox. With 100,000 titles to choose from, including old movies, TV shows and indies, Netflix’s only downside is the wait and that’s where Redbox comes in.

Redbox combines the easy and usability of Netflix with the “watch it tonight” concept of Blockbuster. The DVDs are rented via one of 24,000 Redbox machines located in grocery and convenience stores all over the country. Customers swipe their debt card, choose their film then return it to the machine when they’re done. The only downside here is selection. The machines only hold a limited number of DVDs, so they carry only the newest, most popular movies available at any given time.

According to, Redbox realizes that they’re giving up a great deal of business to Netflix due to their inability to offer a wider variety of films, but now they’re prepared to do something about it. They’re going to build their own online rental business that will likely contain a streaming video component just like Netflix.

What I find ironic about this story is the fact that Redbox went into the business of instant DVD delivery in order to fill a need that Netflix couldn’t. By moving their business online, they aren’t giving the consumer anything new. And without anything new, how can they possibly hope to surpass Netflix who is already firmly entrenched in the market? Add to that Walmart, Sears and Best Buy all getting into the movie rental and streaming business and it seems like the field is already too crowded to bother.

Then there’s the problem that just because you do one thing well, doesn’t mean you can do another. Blockbuster tried regaining the top slot by adding an online component but barely took a bite out of Netflix’s business. If Redbox pours a lot of time and money into getting their online unit up and running, they’ll be taking capital away from their brick and mortar-ish business and that could spell disaster for the company as a whole.

I’m all for competition but unless Redbox has something to add to the niche that isn’t already being offered by Netflix, I say they’re better off spending their money to improve the system that’s already working for them.

What do you think? Could Redbox be the first real competition Netflix has ever had?

  • Sephy Hambaz

    I completely agree with this article re: Redbox not proividing any unique value moving forward as they modify their marketing strategy