Could Redbox raise prices again?
Redbox might have to pay more for new Warner Brothers releases, but it'll have them ready to rent much faster than Netflix can.
This post comes from Matt Brownell at partner site MainStreet.
The latest salvo in the struggle between movie studios and movie rental services like Netflix and Redbox was fired earlier this month, when Warner Brothers announced that those companies would have to wait 56 days after the release of a DVD before offering it to customers. Previously, the companies had to wait 28 days.
Netflix agreed to the new delay. Redbox did not.
Redbox announced Tuesday that it had allowed its movie acquisition contract with the studio to run out, which means that the company will no longer be able to buy DVDs in bulk from Warner Brothers. But that doesn't mean that Redbox customers will stop getting new releases from Warner Brothers. Rather, it means that the company will have to buy from a retailer or wholesale distributor.
The good news is that those releases will now be available the same day they're released on DVD. The bad news is that by going through a middleman, Redbox will no longer get a discounted rate on those discs.
So if Redbox is paying a higher price to buy DVDs, does that mean they will be passing that cost along to you?
"I actually think there's a chance that not much changes," says Janney Capital Markets analyst Tony Wible. "Netflix agreed to the new terms, so by Redbox not agreeing to the delay, they have a chance to grab market share. Two months advance is a decent window, and they may be willing to take volume over price." Post continues below.
While Netflix is agreeing to double the amount of time it makes its customers wait for new DVDs, Redbox is doing away with those delays altogether. If that allows them to steal enough customers from Netflix and cable video-on-demand services, it may not mind turning a smaller profit on each rental. (It's also worth keeping in mind that Redbox just raised its prices by 20 cents in October, and may be wary of imposing another price hike on customers so soon.)
But even if Redbox does wind up hiking its prices slightly, it's unlikely that it will make a big difference in sales.
"The demographic they go after, that's not going to make it or break it," says Shahid Khan, a former media industry consultant and now chairman of Mediamorph, a cloud computing software firm. "Most of the time it's an impulse buy." However, Khan says that if prices go too high, customers may prefer to just stay home and spend the $5 or so that it costs to rent a new movie through video-on-demand.
For its part, Redbox did not confirm or deny that the termination of the Warner Brothers deal would bring any price hike. When reached for comment, a Redbox representative would say only that the company "has not disclosed the impact of obtaining content through alternate means."
Regardless of what happens with prices, the contrasting decisions are a good indicator of the diverging directions of the two services. While Redbox is doubling down on physical discs and branding itself as a go-to destination for new releases, Netflix is progressing toward all-digital distribution and de-emphasizing new releases.
"Netflix is saying they're not going to be promoting their DVD business, and they're also going to get hit with issues with the Postal Service," Wible says. "Netflix is trading off a lucrative business today to be able to hopefully hold onto something with more lasting power."
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What a great solution Ray, because paying $50-$100 a month or more for mostly channels nobody cares about and youll never watch, and of which the content is determined by some suit, and hoping something comes on that you find interesting, is clearly a superior bargain to simply paying for the movies and TV shows you actually do want to watch on demand.
Bet I didnt pay $600 for television last year (I didnt even pay $150 between Netflix, my antenna, and renting videos from a local mom and pop video store), and I bet my TV watching experience was better then yours.
Irishfan- Focusing on streaming isnt a terrible idea, hard media is on its way out. Kids being born now will probably be in a world where everything is digital and streaming by the time they are teens.
However, you do hit on the actual problem, and its that streaming at this point is a difficult market for one firm. The studios want huge fees (Starz), or to control their own streaming content (like HBO), and they want to try to restrict the market from obtaining very new episodes or movies (as Warner is doing in this article). This basically leaves a company like Netflix in a position that they are mostly negotiating for the back catalogs of studios, many independent or D list types (this accounts for a large number of old and minor release films populating their library), and they are pretty much at the mercy of whatever the studio wants as far as the availability and release timing of newer stuff.
I think one place Netflix really dropped the ball, and might have had some success with, would be the development of their own original programming. If they could even become remotely on par with HBO's original programming, they might be able to not only charge a premium fee for this, but, could retain a significant viewership to their service on that merit alone, which is exactly what HBO is doing right now. They guard their content very closely, which keeps people subscribing to the channel. Netflix really doesnt have an ace card to play. They might currently have the biggest library, but Amazon and Hulu arent that far behind, and at least Amazon offers other additional perks with its subscription service, such as free 2 day shipping. I think they really should have concentrated on trying to get that ace card sooner in their existance.
I can live with it or without it. I never did understand the rational of buying a dvd unless you knew it would be repeatedly viewed.
I get a chuckle out of whomever came up with the idea of releasing a rental DVD without access to its extra content. As if After viewing the main content I could be enticed to go out and buy the full version DVD.
That explains why the move "In Time" was NOT at Red Box this past Tuesday. If I want to see a new release I missed at the Theater, I am happy to pay a under $1.50 per DVD or if I didn't feel the movie was worth to see in the theater then I am happy to pay even $2.00 for that at Red Box.
Red Box gets special DVD's one DVD was from Warner Bros. the other was from 20th C. Fox. Both DVD's urged me to purchase the retail version of the regular DVD or the Blu Ray as the Rental version did not have any special features.
I have Netflix, now when they went for their split I selected to go with Streaming only as I only got a DVD every now and then, so I figured I could go with Red Box if I felt I needed to see that DVD right away.
People keep mentioning the Library for their DVD rentals, well that only works if your Library can afford to get them. I do not have the time to go to the libary in hopes they have it. Also our libaries in my area have special hours because of cost cutting. So I don't even bother with them.
Here is how rental stores, Red Box get away with renting you the DVD. Because you are renting the DVD to take home it is NOT a public display/viewing so they can do that.
I stopped renting from Redbox. The service went WAY down hill. Their "new releases" were 3 year old movies. I don't want to wait 28 days much less 56 now to see a new release. Verizon's FiOs now has Friday Night movies for just $2.99. Buy the time I rented one from Redbox and actually got it back to the kiosk, I had spent what I would have spent if I just did VoD at home. So sorry Redbox, you were great in the beginning....
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