By William Page
Blockbuster was first to shrink and declare bankruptcy in 2010. The once video rental giant could not cope with the disruption brought about by the growth of online platforms such as Netflix and older direct DVD contenders such as Redbox. The irony is that Blockbuster had the chance to buy Netflix back in 2000 when Netflix’s CEO Reed Hastings approached for a partnership. Unfortunately, Blockbuster did not see the forthcoming disruption as a real threat to their brick and mortar institution and walked away from a potential deal. In the end the brick and mortar institution was bulldozed by fibre optics. By 2005, policy changes within store operations and the launching of Blockbuster online were efforts unattractive to the company’s stakeholders. The CEO John Antioco resigned and, within five years, the business collapsed. Thus, what really killed Blockbuster was not their creaky machinery – for it was well-oiled and tight – but an inability to innovate and keep up with the inevitable changes of the industry.
Now all eyes are on Redbox’s impending doom. The company has shut down 2,000 of its 40,000 plus kiosks and is facing challenges on multiple fronts. Redbox is now looking straight into the face of VOD which allows viewers convenience, value for money and a vast array of services to choose from: Netflix, Amazon, Hulu and other service providers. This is the core of its demise. Consumers are turning to digital platforms for entertainment with the option of viewing on multiple devices. Balancing the market disruption through marketing efforts and acquisition of more content is no longer as effective. That being said, the company is still making efforts to continue with its kiosk service, posting an operating profit of $255.9 million in 2015.
Redbox’s kiosks remains the better choice to some consumers who consider the difference between a $1.50 rental and a $6 or $7 purchase price to be a significant saving. Furthermore, Hollywood studios continue to rely on generating revenues through the kiosks and its 33,000 prime locations as they see them as a major source of revenue. Redbox is now trying to find a bridge that will bring it closer to streamed video, avoiding the digital tide that swept Blockbuster away.
Redbox’s first attempt to penetrate the VOD market, Redbox Instant, failed to gain traction. Now, according to Variety, Redbox is about to launch Redbox Digital. The digital industry sees this as an effort to put the company back in the competition circle. Redbox through Variety issued this statement: “Redbox continually looks for ways to enhance our customer experience. For tens of millions of consumers, Redbox is their source for new release rentals without a subscription. As such, we regularly conduct tests of potential new offerings that may or may not be brought to market, as part of our ongoing commitment to provide additional value.”
Whether this second attempt to tackle the VOD market by Redbox will work remains to be seen. There is little doubt that the core DVD kiosk business will decline over the coming years as people stop watching films on DVD and instead choose the convenience of streaming on demand. The question is whether Redbox is able to transition and innovate to being an online business before its core business dies. Otherwise we may end up seeing history repeat itself as Redbox becomes the next Blockbuster.
Banner image from The Verge