35 Comments

Summary:

If you thought the movie 2012 was disaster porn, just wait for the entertainment apocalypse that Redbox’s dollar-a-night movie rentals will bring about. That, in a nutshell, is the bottom line of a new report (PDF, hat tip to Video Business) from the Los Angeles Economic […]

If you thought the movie 2012 was disaster porn, just wait for the entertainment apocalypse that Redbox’s dollar-a-night movie rentals will bring about. That, in a nutshell, is the bottom line of a new report (PDF, hat tip to Video Business) from the Los Angeles Economic Development Corp. that says Redbox’s low-cost movie rental will cost the entertainment industry $1 billion in revenue. It’s a disaster!

This loss in revenue will lead to a slowdown in movie production, crops will wilt, the earth will turn to salt, etc. The study says that Redbox is disrupting the home video industry in four ways:

  • DVD sales are cannibalized
  • Customers will want lower rental prices from other outlets
  • The perceived value of movies will be harmed
  • Redbox’s sale of discs into the aftermarket conflicts with other retail channels

Redbox’s kiosks also will send shock waves throughout the industry and could lead to the loss of 9,280 jobs, $35.4 million in contributions to health and welfare funds being cut, and a reduction of $30 million in tax revenue.


At this point a director would cue the author of the LAEDC report to shake his fist, glare at the sky and yell, “Damn you, Redboooooooooox!!!!!”

While the report spends much of the time decrying Redbox and its kiosk ilk, it does hedge itself a bit, saying that “foregone revenues from low-cost new release DVD rentals may be hard to distinguish from other transformational shifts in the industry,” like the current recession we’re in, new technologies like direct digital download/streaming, and people opting for other forms of entertainment like games and social networking.

In response to the report, Redbox told Video Business that it actually helps the industry grow, and that some of the LAEDC’s data may be flawed.

It should be noted that LAEDC’s mission is to “attract, retain and grow businesses and jobs for the regions of L.A. County,” so it has an agenda. Data from this report will probably make its way into the legal battles Redbox is currently waging with half the Hollywood studios.

The problem the video industry is facing isn’t a new one. New technologies are creating a fundamental shift in the way we consume entertainment. Vilifying Redbox won’t change the fact that change is upon us. Instead of fighting the future, Hollywood should be figuring out how to profit from it instead of the past.

You’re subscribed! If you like, you can update your settings

Related research

Subscriber Content

Subscriber content comes from Gigaom Research, bridging the gap between breaking news and long-tail research. Visit any of our reports to learn more and subscribe.

You're subscribed! If you like, you can update your settings

Related stories

  1. That is a ridiculous report, sounds like an angry buggy whip manufacturer. Forgone revenue? Studios have been charging far too much for way too long. Sounds EXACTLY like the music industry. I think, in the long run, it’ll make it easier for films outside of the studios to find an audience and give consumers more value. Only reason it was invented was because studios refuse to adapt, collapse windows or change their way of thinking.

    1. I agree! Make better movies and we will pay to see them. Keep making bad movies people will visit the Redbox or play Scrabble. Economically $1 beats $11 for the same bad movie that will end up in Redbox in two months.

  2. I’m with you, Chris. Pointing to Redbox as the spawn of Satan and blaming them for some future Hollywood downfall is a bunch of baloney.

    I don’t know about all parts of the country, but my local video rental stores in Southern California were already shutting down before the first Redbox appeared. So…Blockbuster used to rent movies for about $3 for a couple of nights, while Redbox now rents them for $1 per night.

    And I’m supposed to believe that Redbox’s $3 for 3 nights compared with Blockbuster’s $3 for 2 nights is going to cause Hollywood to sink into the Pacific???

    Ok, so is anybody interested in some future beachfront property in Arizona? :)

    Cheers!

    Druu
    Bite Me TV

  3. It’s worth noting that among the corporate ‘members’ of the Los Angeles Economic Development Corp are NBC, Sony, DirecTV, and Time Warner cable.

    1. That is so TOTALLY worth noting! Good catch, Chris. Though now that I think about it Sony has a deal with Redbox).

  4. Somebody goes and does something good only to be criticized by those it promotes. Me thinks vendors of a blue genre are threatened and with all respect to the sensitive nature of the existing job market, getting individuals out of retail video rental jobs and into higher paying knowledge-worker positions will more than make up the perceived tax revenue loss. Probably double it.

  5. It will harm “the perceived value of movies” as opposed to the real value of movies. In other words profits made from inflating the value of movies will disappear. Boo hoo! Nine out of ten Hollywood movies are total crap anyway.

  6. My family has started using redbox about 6 months ago. We have rented at least 20 movies. The past 10 years we haven’t rented 20 movies total. Many people are willing to pony up a buck to see a movie. Now, why can’t my satellite company, with no physical distribution costs do it for $1? I’d rent a movie a week if I didn’t have to physically get it.

    1. I agree with you. $5 for a new release on-demand movie rental is outrageous. I stopped going to movie theaters when the price went to an astronomical level, and I did the same with cable rentals.

  7. Murdoch Attacks Google, Now The Entertainment Industry Attacks Redbox ~ The Blade by Ron Schenone, MVP Tuesday, December 8, 2009

    [...] Source [...]

  8. Redbox is making life very difficult for the movie industry Tuesday, December 8, 2009

    [...] NewTeeVee] Tweet [...]

  9. Redbox: The Enemy of the Entertainment Industry? [STUDY] | Twit U Tuesday, December 8, 2009

    [...] NewTeeVee poignantly points out, the organization behind the study has a vested interest in growing the job [...]

  10. Redbox: The Enemy of the Entertainment Industry? [STUDY] « Web, Internet, Social Media, Technology Tuesday, December 8, 2009

    [...] NewTeeVee poignantly points out, the organization behind the study has a vested interest in growing the job [...]

  11. Redbox is making life very difficult for the movie industry | Products & Tech News Tuesday, December 8, 2009

    [...] [Via NewTeeVee] [...]

  12. Redbox: The Enemy of the Entertainment Industry? [STUDY] | Techdare Wednesday, December 9, 2009

    [...] NewTeeVee poignantly points out, the organization behind the study has a vested interest in growing the job [...]

  13. I hate to point this out to the movie making companies, but it is your high prices and crappy movies that is leading to a loss of revenue. It costs a family of (4) almost $50 (before food) to see a movie. This is the classic Laffer Curve economic problem applied to the movie industry. Here is some advice….Lower your box office prices and you will see your revenues increase. Lower the cost of a DVD and more people will buy your DVD’s. Lower the cost of a DVD rental and more people will rent. Offer inexpensive digital media available through ITunes…and people will buy it.

  14. Stephen P. Schaefer Wednesday, December 9, 2009

    The quality of the report is instantly recognizable from the use of three significant digits in an economic forecast.

  15. Redbox: The Enemy of the Entertainment Industry? [STUDY] | World News Wednesday, December 9, 2009

    [...] NewTeeVee poignantly points out, the organization behind the study has a vested interest in growing the job [...]

  16. Forget DVD Rentals for $1 a Day; How About 6 Cents an Hour? Wednesday, December 9, 2009

    [...] Redbox is set to destroy the Hollywood with $1-per-night DVD rentals, what’ll happen if Big Box DVD kiosks start appearing around the country, charging just 6 [...]

  17. Flow » Blog Archive » Daily Digest for December 10th – The zeitgeist daily Thursday, December 10, 2009

    [...] Shared Study: Redbox Will Destroy the Entertainment Industry. [...]

  18. Study: Redbox Will Destroy the Entertainment Industry | Blogs on reviews and hotest trends Thursday, December 10, 2009

    [...] post:  Study: Redbox Will Destroy the Entertainment Industry Share and [...]

  19. Coming Soon to Your Safeway: Blockbuster Thursday, December 10, 2009

    [...] controversial topic for the industry. A recent study by the Los Angeles Economic Development Corp. estimated that Redbox, with its ultra-cheap rentals, will cost Hollywood $1 billion in revenue alone. Redbox, on the [...]

  20. Top Posts — WordPress.com Thursday, December 10, 2009

    [...] Study: Redbox Will Destroy the Entertainment Industry If you thought the movie 2012 was disaster porn, just wait for the entertainment apocalypse that Redbox’s [...] [...]

  21. NET-PAD.INFO » Blog Archive » Murdoch Attacks Google, Now The Entertainment Industry Attacks Redbox Thursday, December 10, 2009

    [...] Source [...]

  22. The video rental industry has been experiencing a 10% decline ANNUALLY. Redbox may play a role – but only because the industry is undergoing rapid change and restructuring.

    Actual industry data is available at http://www.anythingresearch.com/industry/Video-Tape-and-Disc-Rental.htm

  23. Paramount Re-Ups With Redbox Monday, December 14, 2009

    [...] With Redbox Despite a recent study that concluded Redbox’s low-cost DVD rentals are destroying the entertainment industry, Paramount Home Entertainment  has extended its trial period with the DVD rental kiosk company. [...]

  24. Warner Bros.-Netflix Deal is All About the Long Tail Friday, January 8, 2010

    [...] Rental kiosks have quickly become a new front in the fight for home video, and Hollywood clearly feels threatened by $1 rentals. Netflix  decided to stay out of this feud, instead betting on the long tail to grow [...]

  25. Redbox Makes Nice with Warner Bros., Agrees to 28-Day Window Tuesday, February 16, 2010

    [...] Even as Hollywood studios strike deals to keep new releases out of Redbox kiosks, some still believe that the kiosk business will undercut overall DVD sales and could potentially destroy the film industry. In one particularly spectacular report late last year, the Los Angeles Economic Development Corp. claimed that Redbox’s low-cost movie rental will cost the entertainment industry $1 billion in revenue. [...]

  26. Redbox is making life very difficult for the movie industry | Technology Magazine Thursday, February 18, 2010

    [...] [Via NewTeeVee] [...]

  27. The commenters are all morons they make no common sense arguments to an excellent article. The same commentors steal music for free and if it were their job on the line they would listen to his point. Everybody in America is out for themselves until they feel the effects. If the commentors could steal the movie for free they would absolutely do it…that’s the bottom line.

  28. Hollywood Studios Place Bets on On Demand Wednesday, March 17, 2010

    [...] decline in DVD revenue could continue, as consumers flock to $1 DVD rentals from kiosk vendors like Redbox or increasingly turn to DVD-by-mail subscription services from [...]

  29. i am a former redbox employee and i can say that redbox is already destroying the movie business. between redbox and netflix, all the local movie rental stores are going out of business. just look at movie gallery!
    BTW if anyone wants to screw redbox you can return your movie backwards so the kiosk spits it out, then leave it alone for 20 sec. and it takes it back in. the disk then becomes “unknown” in the inventory. once the merchandiser comes to the machine they will take out all the unknowns and re-insert them using the service menue. this makes the dvd show up as if it were returned after 1 day no mater how long you had it (before the 25 day limit that is).

    use this at your own risk. or just switch to netflix.

  30. Paramount: Redbox Had ‘Minimal Impact’ on DVD Sales Tuesday, June 15, 2010

    [...] warned that Redbox’s low-cost DVD rentals would eat into new release sales and ultimately destroy the entertainment industry. But with at least one studio in Redbox’s corner, others in Hollywood might have to rethink [...]

  31. Looking for a Laptop in Melbourne? We Melbourne retailers of laptops and notebooks plus laptop batteries and accessories. Specialists in HP notebooks and …Toshiba OFFICIAL UK Site. With our latest range of Laptops and Notebooks designed for home & business computing. From entry level to ultra portable …

  32. Redbox is doing for the consumer what Blockbuster and Hollywood have failed to do by making entertainment affordable for everyone. Redbox brings a great value and the right price and should not be considered cheap. When a movie is released on DVD we the consumer can walk into Walmart and buy that movie for $25 give or take which for a family of 3 or more is a value in itself because of the increasing cost to see a movie in a theater. We’ve all done it and gone and bought a new movie then got home and watched it and it wasn’t as good as the hype. But you cannot return a opened movie to the store unless damaged and only for the same movie. At $1, rent it before you buy it for your home collection. Redbox and Blockbuster will pay the same price for the DVD or Blu-ray, the difference is that Blockbuster charges $4 something to cover the overhead of that big store and payroll. Renting at 20-25% of the cost to own is not nearly as good a value.

Comments have been disabled for this post