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 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.