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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.

By MSN Money Partner Feb 2, 2012 2:48PM

This post comes from Matt Brownell at partner site MainStreet.

 

MainStreet on MSN MoneyThe 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."

 

More on MainStreet and MSN Money:

27Comments
Feb 2, 2012 5:39PM
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Netflix strategy is a fail. I would much rather spend a $1.50 at a kiosk and get a new release rather than wait a year or more to watch it
Feb 2, 2012 5:46PM
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I don't have Netflix but no way would I sign up with a company that made me wait almost 2 months for a movie. I use RedBox and it's still only a dollar if you reserve it online. Glad they'll no longer be a waiting period for certain movies at Redbox.
Feb 2, 2012 6:05PM
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I watch all the new dvd on the day it opens or in a week or so.  I use the local library.  The movies are free, one can preorder and it comes  out the same day as the dvds are released.  I have saved so much money on dvd fees.  Use your local library as this is the greatest secret.  I just got Contagion, Drive, Moneyball, Ides of March last week and this week.  This is the best deal!!!!
Feb 2, 2012 6:01PM
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They keep on raising it, ill stop giving them business. Simple process.
Feb 2, 2012 5:48PM
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I have Directv and I'll never spend $5.99 to watch a movie on PPV
Feb 2, 2012 5:41PM
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I refuse to waste time trying to watch movies on cable.... the commercial breaks aren't so bad, but the idiotic on-screen advertising for other shows with animated characters etc down near the bottom of the screen (like on TNT and SyFy) make anything unwatchable!!!
Feb 2, 2012 5:47PM
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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.

Feb 2, 2012 7:37PM
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Do they really think people are going to buy dvd's if they not available on Netflix for 58 days? Remember when Hbo and Showtime use to put out newer movies? Coming to America's on now, what year was that? 1986? I have two little ones so I don't get out to the movies often, but my fat **** is not so fat I can't go to Family video and rent new releases. Netflix is good for tv shows. Finished all of Breaking Bad and Dexter, I'm thinking Mad Men next.  Most movies that come out now are only worth viewing once. A course you have to buy the dvd to see any special features. Such is life not much bang for your buck anymore.
Feb 2, 2012 5:49PM
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Hopefully Redbox will learn form the blunders of Netflix and keep price increases to a minimum.  Personally I feel that Netflix has entered the twilight of it's years, I see no upside to the company's strategy of focusing on streaming.  They have a limited catalog of movies and virtually no new releases available for streaming.  There is only a small niche of people that are interested in watching old movies.  From a shareholder's view, there really is no point of being the first in the streaming market.  It's going to take a whole lot to get these Hollywood studio fat cats to realize that the dvd purchase market is dead.  Consumers want to watch movies in their homes, on their phones, on their tablets, etc.  If these movie executives don't wake up soon, movie piracy will be just as bad as music piracy was when Napster was introduced.  Quit hanging on to a dying business model and try to get on board with a new and profitable model for electronic distribution.
Feb 2, 2012 6:02PM
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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.

Feb 2, 2012 8:07PM
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People need to stop worrying about saving a penny here and saving a penny there. Thats why the economy is so bad. Stop being cheap-o's and spend that extra dollar if you can. If you really need to put that much time and energy in trying to save 30 cents then im sorry but go find a better job or go back to school.
Feb 2, 2012 8:17PM
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Look how spoiled we are.  Used to have to wait over a year for a movie to come out on video, now we are complaining about a couple of months?  In a couple of months you can pay $6 to see a movie that you family would have had to pay $25-$60 to see in the theater.  I mean hell, even if you buy the Movie for $20 you are coming out ahead, because you get to keep it forever.  Think you are not going to watch it again?  Name a good movie you haven't seen at least twice.  If you buy a BluRay for $25 you can sell the DVD and the Portable version and maybe end up only paying $10 or so.  After a year of buying movies, I have a movie collection that friends and family can also enjoy.  What do you have after a year or renting?   Not saying buy all the movies, but it certainly paid the purchase the blockbusters.  If I have a problem with any group, it's the group that pays the outrageous prices to go see a movie at the theater.  After your ticket and a drink and popcorn or candy, you are around $20 in the hole, and that's if you are lucky enough to NOT have a date. LOL  Other wise you are staring at over $50 for a 3D movie and still around $40-$50 for a regular movie in prime time...  That's just insanity!  Home theaters are reasonably priced these days.
Feb 2, 2012 7:52PM
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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.

Feb 2, 2012 7:43PM
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if you go rent a movie fron the video store your paying $3-$4 a movie for a new release where else for a buck and a lil change can you get a movie and then bring it back to many different locations.I always get movies from red box and if they went up to $2 a movie i would still me renting from them.i'm going out now and renting a movie.
Feb 2, 2012 7:38PM
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I don't know what you people are talking about with the corporations being greedy.  So far as I can tell movie studios HATE money.  Otherwise why wouldn't they just sell high-quality digital versions from their own website that I could pick up for a few bucks?  Why is there no online service where I can just tell it which tv shows I want to watch and it charges me $.50 for each episode, downloads them for me, ready to stream to any of my phones, computers, or TVs?  Why, in this day and age, can't I *instantly* watch any episode of *any* TV show online for a reasonable fee?

Sure, some things are available here, others are available there, but I don't want to search my cable provider's on-demand, the producer's website, hulu, netflix, and blockbuster just to have a 10% chance of tracking down a single show or movie.  Fix it, studios.

All those services are available illegally.  None of them are available legally, no matter how much you're willing to pay.  My conclusion:  TV & Movie studios hate money.  Or at least they hate *my* money.
Feb 2, 2012 8:00PM
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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. 

Feb 2, 2012 7:57PM
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I think the best combination is Netflix instant stream and Vudu.  I can get both on my PS3 and Vudu has the new movies on release day.  They even have some every now and then the are still or not yet at the theater.  And for my money $5 for a new release for the whole family sure beat $12 per person.  Redbox, you have to go pick it up and take it back and it you count your time and your gas, you are actually paying more the buy a movie for "$1" (read $1.20 plus tax)
Feb 2, 2012 6:36PM
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Come on people..Netflix is not that bad..yeah they raised prices cause every business is in it to make money..they are all about the bottom line.  I have a Netflix account and use streaming only.  I only pay 8-9 bux a month, can watch movies while Im doing cardio. If I want to watch movies from Redbox, I will rent just one at a time.  Im pretty happy with both and have never had any issues with either company...and for those that keep on complaining about greed, everyone is greedy..Anyone who knows anything about a business knows that its always about a profit..if you dont then your really dense..So quit complaining about corporations being greedy, cause Ive seen humans be greedy as well...
Feb 2, 2012 7:45PM
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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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I still don't get why everyone is so down on Netflix. $60 or more a month for cable or $8 for Netflix for more or less the same content. Sure I have to wait a bit but I like the convenience and cost. In some cases the content is available quite quickly and I can watch it exactly when I want. I also use the library from time to time and am a fan or Redbox. My problem is that Redbox never costs me a buck because I never hit the box the next day. My $1 rental usually costs me $5 or $6, plus I rarely get just one movie at a time. The biggest problem is still the damn cable companies and the big wigs at Warner Brothers not happy with their puny 7 figure bonuses. I personally wish that DVD's would die and companies would let me buy and download digital movies that I could store on my home server. The only reason I buy DVD's now is to come home, rip them and store on my server so I can stream to all the devices in my house. And yes, my content is all legal. If I rent a movie from Redbox that I really like, I go out and buy it so I can enjoy it over and over. I have 3 or 4 large boxes of DVD's in my closet that never see the light of day...
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