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Study: Redbox Will Destroy the Entertainment Industry

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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.

35 Responses to “Study: Redbox Will Destroy the Entertainment Industry”

  1. 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.

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  3. 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.

  4. 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.

  5. CoolJames

    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.

  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.

    • 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. Bent Franklin

    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.

  8. 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.

  9. 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? :)


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  10. 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.

    • 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.