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Posts Tagged ‘Redbox Kiosks’

Consumers often reminisce about the days when two people could see a movie for less than . They long for rentals of new movies and DVDs they can buy for . The people want what the people want. They know there are hundreds of names on the cast and crew list. They know that actors like Mel Gibson and Tom Cruise don’t come cheap. They know that special effects, extra features, costumes and filmmaking don’t come cheap. Even so, they’re also cognizant of the fact that a “bad year” is one in which the net profits are “only” billion. No one is crying for the victims of movie piracy. Interestingly enough, instead of caving in to the demands of consumers, the motion picture companies have decided to fight against “undermining forces” like Netflix and Redbox instead, trying to buy themselves just a little extra time to capitalize… before their business models crumble and fall completely.

Late last year, Universal Pictures ordered its distributors not to sell its DVDs to Redbox until the new movies had been on sale for 45 days. Fox and Time Warner also decided that their top movies should be out for at least 30 days before being available for $1 through the Redbox kiosks. This decision is being contested in court by Redbox and Netflix, who are also being affected by these new regulations. According to Time Warner CEO Jeff Bewkes, the $1 rentals should be treated like the “cheap show” movie theaters with an appropriate window of time for the entertainment industry to make the big bucks off consumers. Yet, Mitch Lowe from Redbox argues that they can afford to pay the studios more because they’ve “significantly reduced the cost of delivering movies to consumers” and they garner more repeat business. Motion picture giants are primarily worried that the undercutting of prices is what will jeopardize their whole business model.

Unlike Fox and Universal, Paramount is taking a more mature stance on the Redbox DVDs kiosk. “There has been a lot of debate in the industry about the impact Redbox is having and will have,” explains Paramount Vice Chairman Rob Moore, “and we felt the best way to make a decision is by getting the information. Then we can make an informed decision based on what we will have learned over the next three months.” They have, so far, agreed to continue dealing with Redbox until the end of 2009, while studying the impact Redbox has on their business. If they see the relationship as advantageous, then they will make a 5 million five-year deal with the company. If they feel the rentals are hurting the probability that people will buy movies from them, they may impose certain restrictions.

“Having our [movies] rented at in the rental window is grossly undervaluing our products,” complained Chase Carey, president of Fox’s parent company, News Corp. Naturally, the Redbox people want to appease consumers by keeping prices of their DVDs as low as possible. However, they also can’t afford to lose motion picture support either. Though they have other channels and ways of getting new movies, despite arbitrary distributor restrictions, these agreements cut into their profit margins too. So Redbox CEO Mitch Lowe is taking another look at his price model and is considering experimenting with other prices. For instance, he may offer video games or special feature laden DVDs for slightly higher prices.

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