Could Redbox Mean the End for Blockbuster?

At one time, Blockbuster was the king of video rental; however, customer dissatisfaction grew along with the company’s market share, and, eventually, the DVD-by-mail industry was born. Netflix (a coincidentally despicable and dishonest company) capitalized on the growing number of irritated Blockbuster customers and developed a completely new way to rent movies. The service became popular and did massive damage to Blockbuster’s stranglehold on the video rental business.

Blockbuster has partially stayed alive by offering an online service comparable to Netflix. Like Netflix, Blockbuster’s online service is not very good and has angered numerous subscribers with dishonest business practices. The online service has proven to be a flawed venture for Blockbuster and will probably be discontinued or significantly overhauled at some point.

Blockbuster’s final hope for survival has been their online stores. Independent video rental stores have been scarce for several years now, so Blockbuster has been one of the few place people can visit to personally rent DVDs. Redbox may be the company who is about to change that.

Redbox (www.redbox.com), a company started in 2002 by McDonald’s Ventures LLC and now equally owned by Coinstar, poses a tremendous threat to Blockbuster’s stores. Redbox is a network of over 10,000 DVD rental vending machines (or kiosks), which are located at McDonald’s restaurants and drug stores around the nation. The vending machines are normally accessible 24 hours per day, every day of the year. They offer mostly new and recent releases for $1 per night. Basically, anyone with a credit card can go find a recent DVD at any time of the day for just $1.

The one thing Blockbuster had going for it was allowing for people to spontaneously rent new releases. Redbox offers the same option in more locations, with better hours, and at a much better price. Why would anyone drive four miles to rent The Dark Knight for $3 to $5 during rigid store hours, when one can simply drive two miles to rent the same DVD for $1 any time of the day?

If Blockbuster management is even remotely competent, they have begun plans to install competing DVD vending machines all over the country. If Blockbuster is not in even competition with Redbox by the end of 2009, Redbox and similar companies like The New Release (www.thenewrelease.com) and DVDPlay (www.dvdplay.com) are likely to tear into Blockbuster’s market share and drive the company down the road to obsolescence—a trip that is long overdue.