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Dave Taylor
Dave Taylor has been involved with the Internet since 1980 and is widely recognized as an expert on both technical and business issues. He has been published over a thousand times, launched four Internet-related startup companies, has written twenty business and technical books and holds both an MBA and MS Ed. Dave maintains three weblogs, The Business Blog at Intuitive.com, focused on business and industry analysis, the eponymous Ask Dave Taylor devoted to tech and business Q&A and The Attachment Parenting Blog, discussing topics of interest to parents. Dave is an award-winning speaker, sought after conference and workshop participant and frequent guest on radio and podcast programs.

The next evolutionary step in DVD rentals: Redbox

I've been renting videos and DVDs since videotapes first came on the scene, starting with the $5-7/overnight rentals with draconian late fees of the early generation of video rental all the way to now being a long-time NetFlix member, so it should be no surprise I was intrigued when I saw a DVD rental kiosk at the local gas station yesterday.

Upon closer examination,the attractive kiosk proved to be run by Redbox Corporation and it had a simple system where you could swipe your credit card and rent any one of a number of current release DVDs for only $1 a night.

But it wasn't until I visited their Web site that I knew why this company is one to watch, and why agile little Redbox is going to redefine the entire world of DVD rental...

It turns out that Redbox is a wholly-owned subsidiary of McDonald's Corporation, which was a delightful surprise: while McDonald's might not be where I personally go for something to eat, I certainly recognize that it's an omnipresent company with a remarkable reach into both our society and culture. Who better to tilt at the windmill of traditional DVD rental than a multi-billion dollar mainstay of the corporate world beloved by millions of people?

Redbox Logo
In the interest of doing some research, today I went to the local McDonald's -- they have a Redbox kiosk in the store -- and rented two movies.

I was impressed with the entire experience.

First off, there are limitations to the Redbox approach to rentals, not the least of which is that I'd estimate that the unit has no more than about 50 titles, total, and there's certainly a chance that the movie you seek would be unavailable since its reliance on physical disks means that there's a finite number of any given movie. (You can see what's in the kiosk right now on their current releases page)

The upside is amazing, though. For a paltry $1/day you can rent movies and return them to any other Redbox kiosk. This means that if there's a participating McDonald's on both ends of your next plane flight, train trip or other long journey, you need just add 10-15 minutes to your travel time to grab a couple of newly released DVDs, watch them on your flight, then drop them off on the way to your hotel. That will definitely kick the legs out from under the airport-based (expensive) DVD rental companies.

Even more interesting is the potential impact on companies like Blockbuster and Hollywood Video because one of the main costs of running a rental store is the square footage: if you could have the entire store automated and have a simple kiosk delivering up the individual films, you could theoretically offer thousands of popular movies in a fraction of the real estate. Less overhead = lower prices or higher margins. (Meanwhile, Blockbuster and Hollywood Video still require that you return your rental to the same outlet you rented it, a ridiculous limitation in this day of high-speed pervasive networking and highly automated systems0

Just for a moment, also imagine what it would be like if the Redbox kiosks could produce self-destructing DVDs (e.g., 72-hour DivX, for example) as an option so you wouldn't even have to bother returning them. Now it's just a matter of hard disk space within the kiosk computer: the system could foreseeably have a library of tens of thousands of movies, erasing one limitation of the system. Since you'd never have to return them, they can be less pervasive too: $1 for a regular DVD or, say, $2.50 for a self-destructing DVD would be a lovely set of options.

If Redbox never goes any further than having kiosks primarily in McDonald's restaurants throughout the United States and never has more than 50-75 newly released titles, though, I still predict it will be the kind of success that will shake up the rental industry.

If you rent DVDs, do yourself a favor and check out Redbox and you'll have a glimpse of the future of DVD rental.

Posted by Dave Taylor at July 19, 2005 9:38 PM

Comments

I've been using Redbox for over a year, mainly because there's a McDonald's just two blocks from my house, and which is closer than any other video rental place. The selection is limited, but I've found myself more than once renting a mediocre movie because, hey, it's only a dollar! I think they also hope it attracts customers for their, uh, food. I occasionally uby a milkshake or sundae; it's very unlikely I would've done that if not for the Redbox "bait."

Posted by: Derek Scruggs on July 20, 2005 8:50 AM

The first thing I thought when reading this was: "that's a brilliant way to get people to McDonald's." Then I read Derek's comment. Indeed, this is a great one-two punch: make some money on the rentals, then make even more selling food/snacks to customers who may not have come there otherwise.

Posted by: Josh Carter on July 20, 2005 9:44 AM

The approach Josh cites can certainly work; I recently blogged my experience with using McDonald's WiFi services in (of all places) Farmerville, Louisiana. See http://www.e2ksecurity.com/archives/001504.html.

Posted by: Paul Robichaux on July 21, 2005 9:09 AM

Love the idea, but the limited selection is a heavy, heavy, drawback, unless you are the sort that doesn't care what you are watching. What person is going to watch that movie where Vin Diesel is the babysitter? That's the kind of titles I found when I went for my first Redbox shopping experience.

Posted by: Justin Hackworth on July 21, 2005 8:06 PM

I was very impressed by RedBox here in SLC, which is undergoing a major rollout. I don't like the ones that are actually located INSIDE the McDonald's though. That's certainly less of an issue with their new "open late" policies though.

Posted by: Ben Rip on July 22, 2005 7:50 PM

I have been using Redbox for over 10 months now. We only have one in the area, but it is located at our grocery store wich is great cause we already go there atleast once a week. My family is hooked on Redbox. I've never had a problem at all and we rent about once a week. The issue of available titles has never bothered me. since we don't go to the theater very much new releases keep us entertained. If anyone from McDonald's or Redbox reads this...PLEASE put more locations in Connecticut. I'm Lovin It!

TK :-)

Posted by: Torrey Kite on September 30, 2005 10:46 AM

I, too, have been visiting Redbox here in SLC for quite some time. I love being able to get the new releases for a buck.

Since I visit the Redbox so often, I have put up a new website/blog dedicated to it. There you will find news, updates, experiences and more regarding Redbox...

And, even more importantly, you will find Promo Codes that will make sure you can get a free rental every once in awhile.

Check out the site at: http://www.insideRedbox.com

Michael

Posted by: Redbox DVD Rental on December 5, 2005 4:01 PM

I'm so glad I found you're blog, I'll have to add it to my daily-reads list.

Anyawy, you wrote this post almost a year ago. At this point, Redbox is blowing up all over the US. They are continuing to sign deals with groceries, drug stores, etc.

The best thing about it is that you can get free codes by visiting the Redbox Codes website: http://www.redboxcodes.com

Happy Renting Everyone!

Posted by: Redbox Codes on April 17, 2006 10:40 PM

How come Redbox or Dvdxpress don't have more locations in big cities like NYC? It seems so logical that concentrating their investments here as opposed to say, Minneapolis, would produce a much higher return on investment.

Love to hear your thoughts.

Posted by: NYC Kid on February 25, 2007 9:54 PM

Redbox is simple and easy. You walk up, check for what you want and rent. All for a $1.00 and then buy a burger for a $1.00. If McDonald's had a tv/dvd table I'd have a date, a movie and a meal. Just kidding, great concept.

Posted by: Frank Carrasco on May 31, 2007 10:32 PM

THE STUPID REDBOX CHARGED ME $1.07 AND I ENTERED A FREE DVD CODE FROM MCDONALDS COUPON.

Posted by: LYNN on June 26, 2007 8:30 AM

I have rented dvds using netflix, blockbuster and now redbox. I stopped using netflix because of their "throttling," and switched to blockbuster when it was possible to turn in the mailed dvds to obtain dvds right at the bb location. A great advantage over netflix I think. I still use bb online, getting older movies I'm interested in. I get up to three movies, which is sometimes enough to trade for new releases. But I've been using redbox in conjunction with bb. I copy all the movies; now have a library of thousands of titles and have saved thousands of dollars. I rent and copy an average of about 12-15 movies each week (for my own benefit, not for resale). Now that blank dvds are about 30 cents each and the rental is relatively cheap I don't have to worry about what I will do during my retirement years.

Posted by: gary on June 26, 2007 7:51 PM

Gary, i hate to be the one to break it to ya... but thats still illegal in America.

Posted by: Jorhe Sanches on July 4, 2007 9:45 PM

I "took the bait" and went to McD's to investigate RedBox. What a concept!! I've been an owner of McD's common stock for over twenty years and I'm pleased with its performance. However, I am thrilled to learn that RedBox is owned by McD's. I'm thinking that's going to bolster the value of their stock for years to come. X-cllent!! BTW: when we were there to investigate the RedBox, we found the system SO comfortable and simple that we had to rent a couple (and buy some food and ice cream). Obviously, the bait worked and I think and hope it will for a very long time. Everybody: Eat more McD's !!!

Posted by: Lar-in-Jax on July 22, 2007 8:48 PM

It's important to point out that RedBox units are in other locations besides McDonald's. I first saw one of the RedBox kiosks at our local Wal Mart about a month or two ago, and we've used it to rent a few videos. Very convenient, super easy, and the price can't be beat, although it's matched by Amazon.com's UnBox service for selected titles (most are about $4, but they have a rotating 99-cent collection which often has good titles). What RedBox should do is follow Amazon's lead...have auto-expiring videos available for on-demand download, but add a bonus so that if you watch the video in the first day, you're only charged $1. If you watch it within two days, $2, and so on. There should probably be a cap on this so it doesn't exceed rental prices from other vendors, and still have a maximum time period in which to watch the video. So while RedBox is certainly the benchmark for for physical DVD rentals in terms of price and convenience, I'm still looking for online video-on-demand to mature a bit. Amazon's service is heading in the right direction, but chances are someone else will come along with a better setup. Wonder who that will be? Hmmm....

Posted by: Justin on August 12, 2007 7:48 PM

Hi, I have a problem I have misplaced the cover of the movie to return it to the box and now I am stuck with the movie and I would like to return it so how can I do this?? Please send me a e-mail telling what to do. Thank you

Posted by: latrice on August 13, 2007 9:25 AM

the commie thief redbox charged for 2 extra days. i played this movie twice in 1 day.

Posted by: david collins on August 20, 2007 3:37 PM

I thought Redbox was pretty cool until the one time I couldn't return the DVD. The machine kept spitting it back out and saying there was a problem, although I had loaded it correctly and the bar code didn't get wet or destroyed. I called their customer service center several times and left messages, since apparently they don't have enough live operators to help customers. Their voice mail said I would get a call back within 24 business hours, and it's been over 2 weeks and I've yet to actually talk to somebody. I guess I'm going to end up owning the stupid DVD. I'm going back to Netflix, where I've never had a single problem and pay less for unlimited DVDs (3 at a time) than I paid with Redbox - we'd rent 3 or 4 DVDs at a time and end up keeping them for a few days each because it was so easy to forget to return them. I think Redbox depends on the convenience - or lack of - with their customers driving out to return the DVDs within a day, to boost their profits. I was willing to accept that and still found it quite convenient, until this problem. The lack of customer service is unforgivable, and I will not be renting any more DVDs from Redbox in the future.

Posted by: Kristin on September 11, 2007 10:22 AM

I tried to return my daughter's DVD rental back to Redbox and jammed the machine. Come to find out Redbox customer service says I did not rent this particular DVD title.

With several phones phone calls to both Redbox and The New Release come to find out I returned a The New Release kiosk DVD to Redbox. So I made a mistake! Big deal, so welcome me to the human race! I have strong suggestion to both kiosk businesses. Upgrade your software to eject any unrecognized DVD! By the way, test it a few times and make sure it works!

Posted by: Steve on September 20, 2007 11:32 AM

Here in Phoenix most of the Walgreen's have Redbox units. I have seen them for at least six months and had been curious. I finally rented a couple of movies two weeks ago and thought that this was a great concept! I too had been a Netflix customer for years but got tired of the "long wait" for all the movies I wanted to rent. We used Redbox several more times until tonight when the Redbox unit I went to was down due to technical difficutlies. The problem is that I rented five movies and they are due by 9:00 P.M. It was 8:55 when I got to this Walgreen's. So now I'm out an extra $5.00 becaue of their problem? I don't like the money coming out of my account and I have no control over that. I went from loving Redbox to I won't ever use it again in a three week period.

Posted by: Paul on November 23, 2007 9:24 PM

where can i invest in red box and buy one

Posted by: jon on January 9, 2008 6:22 PM

Do you sell the redbox's and if so how much are they and what does it involve?

Posted by: Jan Bradley on January 14, 2008 5:34 PM

I saw a Redbox and just stared at it for awhile.Then I just walked off.

Posted by: Bo on January 15, 2008 8:59 PM

I used Red Box once and was charged $52.50 for 2 movies that I never received. I have spent time over the last 3 weeks trying to resolve this to no avail. BUYER BEWARE!

Posted by: TommyO on February 4, 2008 9:44 AM

strangely enuff i've known nothing but good from these little machines ... to the point ... i rented a movie i never took back ... got charged the 25.50 for it ... 2 months later my GF finds it and takes it back on her way to work ... ..and they gave me a dollar back ...

its just to sad not to laugh!!

Posted by: Ron on February 24, 2008 8:25 AM

I have rented about 4 or 5 times from Redbox. I like the convenience, however it tends to carry many B movies that are a waste. Name brands a good deal, otherwise don't waste your money. Unless you know trust the company or know the title, don't waste your money.

Posted by: Rusty on February 24, 2008 9:11 PM

I used the REDBOX in front of the McDonalds for my 1st time EVER in Kansas City,MO. on Prairie View Rd/Barry Road & it was very simple to use.UNFORTUNATELY, when I returned the movie in LESS THAN 24 hrs(before the 7pm deadline the following day) I was charged an extra $1 fee that's pending on my debit card account ! I'm VERY DISSATISFIED & plan on contacting someone today on this matter ! I know it's only $1, but I followed the guidelines advised & if this happens to multiple people (as I see this happening),there may start being lawsuits,etc. & I'm sure McDonalds would NOT want the publicity about this ! I will be driving up there today to discuss my complaint with them & if THEY'RE WISE about it-they will resolve these issues or they will NEVER get business (food or otherwise) from me & many family members & friends I will discuss this with !!! Word of mouth does ALOT for a company's business, so they better be aware of these issues & START taking some action to CORRECT these ISSUES !!!

Posted by: Shannon on February 27, 2008 8:00 AM

Just rented 3 movies at my local SaveMart RedBox in San Jose. Returned them the following day. Got email confirmation that they were received. Viola! 3 movies, $3.24, no hassles. And now, since you can rent on-line, you don't even have to go to the kiosk to be disappointed they have nothing good. You pick and reserve before even walking out the door. This is a great service the occasionally DVD renter that doesn't want yet another monthly fee (i.e. Netflix or Blockbuster) to have to pay.

Posted by: alim on March 17, 2008 2:12 PM

I would like information on franchising a Redbox

Posted by: Rebecca Rush on March 18, 2008 2:17 PM

I have looked everywhere on how to franchise a red box machine.......Help!!!! Who do I contact?

Vll

Posted by: VL on March 31, 2008 6:11 AM

The key to Redbox being a good deal for you, is that you have to have one on your way to work (or, basically within walking distance to your hosue). If you drive by the red box every day anyway to go to work, then this service is fantastic. We have about 10 boxes in my city, 2 on my way to work, so I am golden. The points about the limited selection don't apply I don't think because they focus on new releases. If you want a back title, go to another spot. I pretty much only rent new releases, on the day they come out (Tuesday) and you can lock in your pick if you do it online. Good bye Blocksbuster online rental...you were great while it lasted, but you are too much money $15.00 per month, compared to Redbox. I don't rent 15 movies a month, so I am switching to Red box. The key here is though you should only rent when you know for sure you are going to be able to watch it and return it by 9pm the next day. Again, going out of your way to return it does not make the financial equation work in your favor (due to the cost of gas), so this is why it's key that you do it on your way to and from work.

Posted by: Kevin B on May 10, 2008 10:23 AM

For those asking HOW TO BUY and invest into a Redbox DVD Kiok:

Redbox does not sell its DVD kiosks to 3rd parties. It places them corporately into various major retailers and operates them directly.

However the DVD Kiosk industry has grown very rapidly in the last 2 years; and includes additional major companies who operate advanced DVD Kiosks like Redbox.

Small investors can buy DVD Kiosk solutions from a few companies like:

www.iMOZI.com

I hope that you find the information useful to your review of this business...

Posted by: Mike on May 31, 2008 1:35 PM

If the RedBox machine fails to register a DVD return, it will charge you for every day until the video is rented again! This is debited from your card and good luck trying to get your money back! I will never rent from RedBox again - it's next to impossible to get through on their 866 number and then customer service is powerless or they respond with sarcastic emails.
-Betty

Posted by: Betty on June 27, 2008 5:11 PM
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