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Redbox Instant CEO: Netflix was wrong to sideline DVDs

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A digital media service – that also offers DVDs? In 2013? “We are a bit of a throwback,” admitted Redbox Instant by Verizon CEO Shawn Strickland at a small press event in Las Vegas on Wednesday. Common wisdom in the industry is that consumers are moving towards streaming and that DVDs are a thing of the past, but Strickland and his team believe that physical media can actually be part of a viable offering for some time to come.

Redbox Instant, which started its private beta test last month, offers consumers DVD coupons as part of their subscription package, and Strickland said that the format helps to provide a unique offering with newly-released titles that other services don’t have. “That’s the freshest way to get the content,” he said about DVDs.

Of course, Netflix (s NFLX) used to provide its customers with a similar offering. The company provided customers with DVD rentals as well as online streaming for $8 a month – until Netflix decided to split the offering into two separate subscription plans in July of 2011.

Netflix has since put most of its energy towards building out the streaming business, and seen the number of its DVD subscribers continuously decline. But Strickland argued that this was the wrong move. “There was a choice forced on the consumer,” he told me.

Redbox Instant now wants to wean some of those consumers off their Netflix subscription – and the company is particularly looking to win over folks who complement their Netflix plan with Redbox rentals. Strickland said Wednesday that between 30 and 50 percent of all Redbox users already subscribe to an over-the-top streaming service.

Redbox Instant is currently in private beta, and wants to open up before the end of the first quarter. To be ready for that, the company is ramping up its device support. Beta testers already have access to iOS and Android apps as well as apps for LG and Samsung smart TVs and connected Blu-ray players. This week, it announced a partnership with Vizio to bring Redbox Instant to Google (s GOOG) TV devices.

33 Responses to “Redbox Instant CEO: Netflix was wrong to sideline DVDs”

  1. As long as content owners continue to make restrictive deals for streaming titles, DVDs will always have a place.

    I definitely think Netflix made a mistake when they split up their by-mail and streaming memberships. They should have continued to offer the bundled service… or even a couponing system — streaming get x disc rentals a month; or by-mail renters get x hours of streaming a month. Which is what Redbox is going to do.

    Netflix increased their profit margin by steering people to the streaming-only plan, but that also gave away the on-disc business to Redbox, which is at plenty of supermarkets & drugstores.

  2. My major complaint with Netflix is the fact that the DVD rental cost is $8.99 a month for only ONE disc out at a time, and it takes them F-O-R-E-V-E-R to send that one title. I have decided to go with all-streaming, since the DVD rental is not a great deal.

  3. streaming is not ready yet without dvd backup. try rewinding lately on netflix? How about how a movie is made or special features? moviebuffs will miss that me included. I guess I was fortunate enough to test rebox streaming in its beta mode. if this will be the product offered to everyone..oh boy!! it is not good. You will be paying for dvd’s you can get at netflix in two days. cost? how about $4.99 for SD. That is redicoulous. One example: Mission Impossible Redbox (streaming) yes streaming $4.99….Netflix (streaming) free yes free.
    I for one will not pay $8.00 a month (more if you want HD and Blue Ray at the Kiosk) for a selection that you have to pay for. Streaming is great if you want to just watch something but for the full movie experience streaming has a long way to go. I will not be a Redbox costumer unless there is more recent titles streaming.

  4. I am probably not alone in feeling that netflix burnt it’s customer base after the 50% price increase for service, I have been waiting for someone to provide a viable option to netflix and I already use Redbox for the movies I can’t get from streaming. If you play it , they will come!

  5. googleit

    The fact of the situation is: Most people don’t like paying extra to their internet provider in order to be able to ‘stream’ movies, etc. online. Unless you at least double the bandwidth of the internet speed that most people currently have, ‘streaming’ is not going to be the wave-of-the-future that many of you seem to suggest it is ? Face it, DVD’s and BLU-Ray discs aren’t going anywhere in the near future. When you add up the total cost, you might want to add on the cost of your monthly upgraded internet and your 4G-plus phone or streaming device. Time will tell but Redbox/Coinstar is one of the most innovative, and well run, companies around. People ‘scoffed’ at the idea of people actually paying to have their loose-coin counted and the idea that there would be a market for it too.Today, Coinstar is one of the top businesses in America, Europe and Canada. I wouldn’t put my money on Coinstar/Redbox failing in this venture either. Just a thought ?

    • Who is paying more (or really that much more)? If you are not using internet for video (including youtube, etc) what ARE you using it for? Email? Just get dial up then. Slower internet is about as useful as 3g. It isn’t. There is just too much content today that requires video or the equivalent. Most people have internet that can handle streaming.

      Oddly enough, i was able to watch quality live espn on my smartphone over 4g (and Sprints at that). That isnt any better than lowend cable/dsl internet.

  6. I just was able to rent Ted on DVD from Redbox. I can’t get it on Netflix! Chirs did make a good point. You can’e put a DVD in a phone or tablet. But that’s what’s good about Redbox..You get the best of both worlds for the same price…Keep in mind..Sony has invested a lot in Blue-Ray and Blue-Ray players. they are not going to let you stream new releases…You still will have to go to DVD’s. I’m doing the Beta test and I like it so far…

    • You can get Ted on DVD from Netflix.

      FYI – my wife does the DVDs. She got 14 dvds in Dec using 2 at a time for 11.99. She probably could have done more but for the holidays and that most were tv shows so they had multiple episodes. And she has cut back because I FINALLY got her to use Hulu. So figure about 86 cents a dvd. No gas. Well except when she doesn’t get the dvds to the mailbox in time. LOL.

  7. The strategy was not wrong, but they did not execute it well either. If they wait too long the DVD service will have zero value, and they will simply have to shut it down and write it off. If they sell now they can still make a tidy profit off of someone willing to ride the long tail for small profits.

  8. Stephanie Rose-Diane Robinson

    I like having options, I have my older movies that I love on VHS, I don’t like paying for a movie at the theater, so I wait for it to come out on redbox, or I can stream “glee” that aired the day before on hulu. I am just waiting to see what redbox has to offer so I can get out of netflix.

    • Don’t discount Netflix. They have been at this for a lot longer. It takes some made skills technology-wise to make all those videos stream and keep it all going. And even then, stuff happens. Make sure you start with month-to-month just in case they are overwhelmed and so you dont get stuck paying for a dog.

  9. Jasonorris

    I think Chris is being a bit narrow minded here and coming across like a ‘hipster’, maybe to be antagonistic?

    Many people want choice and the latest titles. Many people do not have high speed internet access and know it is cheaper to rent a new DVD than pay the 1 off price for it online. Subscription services simply will not have most of the latest titles included due to studio contracts with suppliers.

    Many people like Chris do just want to stream a title, but there is a market for both.

  10. Odd how many of you are under 35. You really think that dvds are going to be around for awhile why are blockbusters closing stores everywhere home town video stores are going bankrupt and Why has netflix said thet disc rental has been going down for years. Meanwhile video distro centers are saying that shippments are at the lowest rate ever. Gee it seems to me that if the rate of rental is down and the sales rates is down maybe discs are going down. At the sametime netflix accounts for one third of peak time internet useage. Further how do you place a dvd into a mobile phone? More and more people sre watching on the go. Get with it. Redbox had to move into streaming but at the same time does not want to look like it has abandoned discs. Hence this story…..

  11. As much as I like the convenience of streaming, you still can’t beat the sheer volume of titles available on disc. There are some older and hard to find titles that you just cant get via streaming. And Blu-Ray’s picture quality still beats the pants off of anything being forced through the constricted Intertubes. Until that changes, gimme a disc!

  12. Virtuous

    There are millions of Americans in rural areas that don’t enjoy high speed broadband. Many new and old movies aren’t available on any streaming service. HBO just locked up exclusive rights to all Universal films for the next 10 years. Netflix has exclusive rights to Disney animated movies until 2016.

  13. I still enjoy DVDs. I think those that are all about instant streaming are out of touch with the vast majority of entertainment consumers. I don’t know the statistics, but it seems like those who only stream things online are a minority. I think hard copies will die eventually, but not any time soon.

  14. gonzo90017

    Call me outdated. There’s still a lot of stuff that’s not available for streaming. Most of the old Toon Disney catalog which my kids love. And some of the older content that is available through Amazon for example is overpriced at $1.99 an episode. At those prices it’s cheaper to purchase the DVD’s second hand on places like ebay.

  15. zambianmike

    Just cancelled Netflix a few moments ago…I use a TV Guardian to filter the vulgarities from the TV shows and DVDs I watch, but I can’t use my device with Netflix. Looking forward to seeing what Redbox Instant has to offer — you see, whatever is clean, I can stream; whatever’s not-so-clean, however, I can use my 4 free dvds with my TV Guardian at home. Sounds like a win-win to me, and it’s not “pointless” at all, in my opinion. Sometimes the greatest innovations happen when folks go back to what was sure-fire and combine it with newer technologies. Can’t wait to see what happens with Redbox Instant.

    • Ok, it is not pointless. But it is not as cost effective. Hopefully someone will see the need you are describing (yes, i do see it as important) and provide a solution for streamed videos. The best way would be for it to run server-side.

      The big issue is dvds (rentals) will go the way of the dodo bird (i.e. Blockbuster) or at least will be an endangered species. This has happened with most software companies. DVDs break and get lost.

  16. Wow this is pointless. Dvds and bluray are dead, have been for years. Anyone still using them is very outdated. There are dozens of streaming services with new movies. When you factor the cost of gas to go a redbox you better off paying the extra dollar for an online rental. The fact that redbox is launching an online sevice proves it.

    • rexalbel

      What online rental service do you use thats less than 4 bucks? a redbox would have to be 25 miles away for most digital rentals to be worth it and theres one pretty much everwhere. I agree that streaming is the way of the future, but only when its cheaper.

      • Vudu starts at 2.99 and redbox is 1.20 plus tax. The avg car gets 25 miles per gal and the avg dist from a redbox is 5 miles. So 10 miles round trip. So at 3.00 per gal you spend 1.50 plus 1.20 plus .07 for tax then you have the return trip at another 1.50 the total is 4.27 so how did you save money. And if you want HD it is another dollar. Hmm I think I will stick with the online rental.

      • Chris,
        Your math is all wrong. At 25 MPG and $3.00 per gal you get $0.60 for 5 miles and $1.20 for 10 miles.. So add $1.20 for gas and $1.57 for redbox rental you have $2.77 total.. Blue-Ray “HD” is another 0.30 cents not “dollar”. Blue-Ray your total comes to $3.07.

    • Stephanie Rose-Diane Robinson

      Well, I am a mother, and I actually still use VHS. all the movies that I used to watch I can get for free on vhs, and use a vhs player. A movie is a movie, and the cheaper the better. I like redbox dvd’s because they are $1 and some change, and I can watch an up to date movie that just came to dvd. I do have netflix but they keep taking off good movies. when I first had netflix they had everything, now they have very old movies on there. When redbox fixes their glitches, I can’t wait to cancel netflix. Netflix has went up as well, I used to pay 4.99 for streaming, now its almost doubled.

  17. Mat Houchens

    That’s pretty accurate. I go to Redbox for physical DVD rentals but subscribe to streaming Netflix. If Redbox Instant can provide the same streaming experience through my blu-ray and xbox 360 with the same or better titles, I will switch immediately.