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The Redbox dilemma

About a year ago, a good friend of ours turned us on to Redbox movie rentals. If you’re not familiar with them, despite the somewhat risque’ sounding name, they’re NOT adult movie rentals. They’re a cheap, $1 a night, movie rental replacement aimed at Blockbuster and the other big box rental stores. They offer many of the latest movies at their ATM-style rental machines scattered throughout most major areas now in McDonald’s, gas stations, Wal-Mart’s and other places of high traffic.

So, what’s the problem? Sounds great, right? Well, yeah, for us the consumer, it is great! It’s cheap and easy, and they’re growing quickly. However, if you’re a major movie studio, they would seem to be not so great. You see, these big studios seem to think these cheap rentals are or will have an impact on their selling DVDs and Blu-rays to us. And, perhaps they will.

With growing concern in 2009 that dvd kiosks may cannibalize dvd sales and rentals, three major movie studios, 20th Century Fox, Warner Brothers and Universal, refused to sell DVDs to Redbox until at least 28 days after their arrival in stores. Redbox responded by filing an antitrust suit against 20th Century Fox and Universal — and starting an online campaign, savelowcostdvds.com.

At the same time, Sony Pictures and Paramount Pictures signed distribution deals with Redbox. The Walt Disney Company permits third-party distributors to sell to Redbox, but has not entered into a direct relationship with the company.

DVD vending companies currently have 19% of the DVD rental market, with 36 percent to rent-by-mail services and 45 percent to traditional stores.

If  the big studios are really concerned about sales of their products, then instead of going against them, much like the RIAA and music business did against MP3 and P2P services in the recent past, why don’t they find a way to work WITH them. Thanks to computers, iPods and high speed internet, digital media is the preferred medium for the upcoming generation. Physical media like DVDs and now Blu-ray discs, while accepted for now, will eventually go the way as the 8-track, cassette tape and even records (LP).

So, here’s where my “creative (imagineering) mind” kicks in. Redbox has already established a strong foothold and consumer connection with their service. Why not find a way to leverage that consumer connection (aka: sales lead)? Make it easy for the customer who just rented your product to buy it, either physically, or digitally. Offer the customer the option of buying a new (sealed) version of the same film, deliverable via regular or expedited delivery. Or, offer a download of the film via the email address already in their system. They could do this two ways, one an option on the kiosk at time of return, or via email on the return invoice/notice or special email with a link to purchase the video. They wouldn’t even have to have their own store or distribution network, they could just link to Amazon or Wal-Mart or some other vendor to supply the videos, and include a $1 off discount since you rented the movie already. It seems like an easy move and it would satisfy the studios (maybe).

Hopefully someone in Hollywood at one of those big studios (and/or Redbox) will wake up and see what’s happening here. The formula for any business to succeed can be stated simply as “find a need and fill it”.  The need here is  for an  inexpensive and easy way for the consumer to get the movies they want in the format that’s most suitable and convenient to their lifestyle. So, give it to them, and watch your sales go through the roof.

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