Is Redbox Going Out of Business?
Redbox is currently going through an uncertain time. They have lost market share to online streaming services and face competition from change-counting kiosks such as Coinstar as well as content acquisition agreements that limit how many movies per kiosk.
Redbox held an outsized lead over Netflix DVD-by-mail service and brick-and-mortar stores such as Blockbuster and Hollywood Video in the early 2010’s.
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They are not going out of business
Redbox is best known for their bright red DVD rental kiosks that stand out in busy retail locations. Once they offered low-cost competition to Blockbuster and others like them, they added thousands each year from 2007 through 2012. Currently they’re transitioning into digital distribution – their stock remains one of Wall Street’s hottest holdings.
Redbox still operates 34,000 legacy kiosks that rent DVD and Blu-ray disc movies, but also provides free ad-supported streaming TV and transactional VOD services. Unfortunately, this decision has elicited harsh reactions from Hollywood who believe Redbox is trying to bypass traditional distribution hierarchies by bypassing them; Redbox even filed lawsuits against three major studios as a result of this issue.
But even with their digital business venture, Redbox’s future remains unclear. Revenue has been on a decline and was particularly hard hit due to pandemic pandemic. According to their CEO, they don’t anticipate returning to pre-pandemic levels until 2023 at least.
Redbox needs original content in order to compete with Netflix and other streaming services, yet investing is difficult in today’s market conditions; additionally, Redbox must contend with competition from retail chains offering movie rentals of their own.
In order for the company to overcome its issues, innovation will be key – meaning finding ways to encourage more people to rent and return DVDs. While this task may prove challenging initially, its return could prove significant over time.
Netflix has also experimented with different business models, such as its movie production division; however, this venture has yet to yield any notable films. Furthermore, they are seeking an online subscription model similar to those used by Netflix and Amazon.
While the new direction has been positive, its antiquated business model and meme status make it a risky investment. Furthermore, Chicken Soup for the Soul’s acquisition will add over $4 million of debt load – alarming investors greatly. A slowdown in digital streaming services may present an opportunity for recovery.
They are not losing money
Redbox was initially seen as an easy and straightforward solution to renting DVD movies after Blockbuster closed: its red vending machines could be found everywhere from supermarkets and convenience stores to supermarkets themselves, quickly becoming the go-to place to rent DVD movies in post-Blockbuster America. Over time though, its market dominance waned due to Netflix discontinuing their DVD mail business and streaming services becoming more prevalent; Redbox began to lose momentum; but is it going out of business completely?
Redbox profits have seen dramatic decline over the years. They recorded losses of $140.8 million for 2021 alone – more than double their previous year losses and 47% below revenue projections at just $2888.5 million in revenue loss due to DVD rentals declining significantly.
Additionally, its ad-supported and subscription on demand (SVOD) business aren’t growing quickly enough to offset the decline of physical DVD rental business. Furthermore, it faces increased competition in this ad-supported video market from platforms such as YouTube, Crackle, Disney Plus and NBC Peacock.
Redbox was already experiencing revenue decline prior to Ebola spreading across the globe, yet some signs point toward positive long-term prospects despite these issues. Recently, they’ve begun producing their own original content as well as joining forces with John Wick producer Barry Sonnenfeld on producing action movies for Redbox.
Although this move might appear as a sudden transition from renting DVDs for just a few bucks a night at its thousands of bright-red kiosks to moving into digital, this move is actually part of an overall plan to move into that realm. Netflix was one of the pioneering companies to use SPACs – special purpose acquisition companies designed specifically to bypass initial public offerings – to raise capital more efficiently than would otherwise be possible – an excellent strategy for any company looking for quick growth.
They are not reselling out dated DVDs
Redbox may seem out-of-place in today’s digital environment of on-demand video and stores on the brink of disappearance, yet its popularity persists despite this reality. But Redbox has an effective plan in place for staying relevant in this new age of technology.
Redbox stands out from its competition due to one simple reason: It doesn’t resell out-dated DVDs like Blockbuster did; Redbox enforces strict rules against this practice and will neither sell nor return out-dated movies to distributors, making it one of the world’s most profitable companies.
Business at Redbox is predicated upon the concept that people prefer renting DVDs over purchasing them, though its sales have seen a gradual decrease as more consumers turn to streaming services such as Netflix and Amazon – two giants making waves in this market – are offering 4K and HD Blu-Ray rentals as a counter measure to this trend. While Redbox may compete well against its counterparts in this arena, competing against them can be tough competition indeed!
Redbox holds several advantages over its competition, such as convenient kiosks located within convenience stores, grocery stores, fast food restaurants, mass retailers and pharmacies. Furthermore, the company maintains strong relationships with vendors while its proprietary carousel system enables remote management of inventory in constant rotation for smooth service delivery and customer experience.
As part of its partnership with Walmart, this company stocks its kiosks with new releases, and recently began including video games in certain kiosks – helping attract younger consumers who enjoy playing video games on-the-go! Furthermore, more kiosks will be added in Florida in order to meet demand.
Redbox remains profitable despite the increasing popularity of streaming services like Netflix. Their rental revenue has seen steady increases while costs for goods sold remain flat; Redbox remains market leader for movie rentals with over 23% market share; this has caused its stock price to reach all-time high levels.
They are not able to obtain new movies
Redbox may not be going out of business entirely, but it is definitely losing ground to streaming services like Netflix and Amazon. Redbox DVD and Blu-Ray rentals have steadily decreased since 2011, leading to revenue falls dramatically as a result. Their future lies with digital distribution services; as well as offering new offerings that will bring them back into profitability; also taking measures such as using physical locations as promotional tools to promote these new offerings and increase customer engagement.
Redbox may seem like an anachronism to some, yet their bright red kiosks remain a common sight at supermarkets, minimarts, and drug stores across America – with 68% living within five minutes of one. At first only renting DVDs was available through Redbox; now they also provide online streaming through Redbox On Demand.
Redbox released their inaugural Redbox Original this year – Bob Saget’s dark comedy Benjamin from A24 Studios – and plans for more to be added this year. While these expansions have helped boost revenues, they have also drawn the ire of movie studios who feel Redbox bypassing traditional distribution structures and letting people rent movies before their official theatrical releases have taken place is unfair competition to them.
Redbox should prioritize digital business in the coming years to avoid getting stuck in an arms race with other streaming companies. There are too many players in the market now and consumers are cutting back subscriptions due to economic uncertainty; without an effective transition into digital and profitable niche offerings Redbox may soon disappear from existence altogether.
In 2021, Outerwall’s profits declined by more than 40 % and this trend continued into 2022. At that time, they exhausted their last $15 million credit line and laid off 150 employees before Apollo Global Management acquired them privately in 2016. Later in 2022 they sold it off cheap to change counting kiosk company Coinstar for just pennies per share.
