Redbox tests DVD sell-through kiosk
PHYSICAL: Study: Low-priced rental machines not cannibalizing sales
By Susanne Ault -- Video Business, 10/16/2009
OCT. 16 | PHYSICAL: Redbox is poised to expand a test of sell-through machines offering regular-priced DVDs, as a complement to its popular $1 a night rental kiosk business.
Redbox's sell-through kiosks are the same size as the rental machines but black.
The company is currently testing dedicated sell-through kiosks under the brand Vidigo in five locations in Los Angeles. Titles, spanning new releases and catalog, are tagged between $19.96 and $20.95. The Vidigo kiosks are the same size as Redbox kiosks but colored black.
Redbox will soon add to the test smaller sell-through machines scaled to tight quarters such as convenience stores, president Mitch Lowe told Video Business. Redbox already has spread many of its rental machines into the convenience channel.
The company also continues to test Blu-ray Disc and videogame rentals, Lowe said.
Redbox’s push into sell-through comes at a time when the company is facing heat from many studios who believe the $1 a night rental model is biting into their film revenue. Starting later this month, 20th Century Fox Home Entertainment and Warner Home Video will begin distributing titles to Redbox about a month after they street widely elsewhere to better preserve their DVD sales business. Universal Studios Home Entertainment has imposed a 45-day delay on titles to Redbox since last year.
However, Redbox executives are circulating a study, conducted this month by Interpret, that indicates that Redbox renters are not cannibalizing studio sales business, and in fact are heavily supporting it. In the past six months, Redbox renters said they bought 3.3 new DVD or Blu-ray titles and 1.4 used DVD/Blu-ray discs. That compares to non-Redbox renters who say they purchased 3.1 new DVD/Blu-rays and 1.2 used DVD/Blu-rays. Additionally, the heaviest Redbox users, who rent at least one $1 title weekly, say they’ve bought 4.4 new DVD/Blu-rays and 1.9 used DVD/Blu-rays.
This data is similar to results from a January NPD Group study showing heavy new DVD purchasing among Redbox renters.
Lowe admitted there is some sales decline at Walmart in locations that include $1 rental machines. However, he believes that the drop is so slight that it has little significance to overall studio business.
“There is a 1% [negative] impact on a title’s sales at Walmart when comparing that [title’s performance] at stores that have rental machines to its sales at stores that don’t have them,” said Lowe.
He also reconfirmed Redbox’s intentions to offer Fox, Warner and Universal titles on street date by buying titles from other sources, including at mass merchants. Redbox pays about the same for titles as the company would through traditional studio or wholesale distribution means, he said, but faces additional costs from labor and travel.
