An article in today’s Wall Street Journal discusses how some movie studios are a little miffed with Redbox, the hot rent-a-movie-for-a-buck-from-a-kiosk-at-your-local-grocery-store distribution vehicle that has taken the nation by storm.
There are about 17,000 such kiosks across the country, and they all feature scores of new movie titles that are either hard to find or harder to get via the DVD rental channel (e.g. Blockbuster,) or more expensive via the direct-to-consumer channel (as in Netflix or several carrier on-demand programs.) For instance, my wife and I just watched “The Curious Case of Benjamin Button” via our programming carrier’s onDemand option. It cost us five bucks to watch it on the spot with a few clicks of our remote. We had a 24-hour window in which to view the film. (Helpful, since it runs nearly three hours.) For $1, I could have driven two blocks to the grocery store and rented it for the same 24-hour period. I could also opt for additional 24-hour periods, each at a $1 increment.
Needless to say, Redbox represents a smart and tidy little distribution channel for entertainment, and a super-convenient choice for consumers. And imagine this: it’s NOT online! And yet, some movie studios are griping about the channel, claiming that it’s cannibalizing sales that it could otherwise realize.
When a consumer rents a DVD via Redbox instead of Blockbuster (for instance,) the studio is losing commission. This is simply based on different channel revenue models. Blockbuster has a deal that pays the studio a percentage of EACH rental fee. The Redbox model acts like a more independent intermediary: it buys the title at face value ONCE, and then recoups that expense and realizes a profit as the film is rented multiple times. (It even gets bulk rates on some titles from some studios, so they may pay even less than face value.)
Movie studios need to learn a lesson from their music studio colleagues. When the RIAA tried to block new channel choices for consumers (heck, the recording industry even tried to get a percentage of sales from cassette tapes, claiming that they were being used to duplicate music without authorization!) it blew up in their faces. Out of the ashes of the Napster and Limewire explosions rose iTunes, a new channel that provided great value and convenience to the consumer and worked a good backroom deal for the recording institutions.
Today, movie studios need to realize that Redbox is a channel choice that’s really good for consumers, too. Instead of blocking and litigating (which is what Universal is doing right now with Redbox,) they should embrace and engage. There may be smart and very creative marketing angles that studios can take using ONLY the Redbox channel. Imagine that – a new marketing plan that drives people OFFLINE. What is the world coming to?