The Future of Disc Rentals: Redbox Doubles-Down, Amazon Cuts
(Redbox)(August 21, 2017) According to a recent report by the Digital Entertainment Group (DEG), U.S. households spent a whopping $4.5 billion on home entertainment during the second quarter of 2017 (up 3% compared to the previous year). That’s a lot of cash and more than illustrates the competitive landscape that companies such as Redbox, Netflix, Amazon, and Vudu inhabit.
How companies attack that consumer-rich landscape is becoming more divided.
There was a time that the physical disc was the clear-cut (and, in some cases, only) medium of choice for consumers. And while physical disc sales have held reasonably steady over the last year, the disc rental market is slowly dwindling. Case-and-point is Netflix’s disc subscriber base, which has declined from 10.1-million in 2012 (Q1) to 3.8-million in 2017. That kind of decline was echoed by overall disc rental numbers from the first half of 2016 through the first half of 2017, where brick-and-mortar, subscription, and kiosk rental numbers have fallen 18.3%.
The biggest name in kiosk rentals is Redbox, which currently has nearly 40,000 locations across the United States. Common sense dictates that Redbox should be entering a world of panic, concerned that its business model (and featured product) is rapidly on a trajectory to doom. That sentiment, however, is far from the truth. Recently, Redbox CEO Galen Smith re-affirmed his company’s mission and commitment to the market: “In small and large towns across America, millions of hard-working Americans rely on Redbox every day for relief and value from the rising costs of going to the theater, or exorbitant fees from cable and satellite companies. Renting discs remains an important consumer offering for families on a budget, or any consumer who wants a better value for new release content.”
And those aren’t just words; Redbox is prepared to back them up. Recently, the company inked new distribution deals with Lionsgate, Fox, and Warner Bros, all of which insure newly released movies are available for rental at (or within a week of) post-commercial cinema release. Pair that that kind of availability with rental cost savings and the fact that most streaming services can only offer a buy option for new releases, and discs appear to hold an interesting advantage.
Redbox is also in the process of rolling out the option to buy from kiosk locations, in addition to adding 1,500 kiosk units to its current fleet.
Amazon.com has signaled that it’s choosing to head in the opposite direction, dumping disc rentals. Last week, the internet retail giant announced the pending closure of its European disc-by-mail service (LOVEFiLM), which has been in operation for nearly 15-years. The company stated: “We have very much enjoyed delivering the LOVEFiLM By Post service to our customers. However, over the last few years we’ve seen a decreasing demand for DVD and Blu-ray rental as customers increasingly move to streaming.”
Customers can continue to use Amazon’s service until October 31, 2017.
This is certainly illustrative of two companies hedging their bets in opposing ways, with Redbox double-down on a business model that’s dying. As a fan of physical media, I’m happy to see the company sticking to its guns (perhaps better phrased as “reloading for the next battle”) and hope it finds enough success to keep its locations open. According to the DEG, one Ultra HD Blu-ray Player is sold for every five 4K UHD TVs, so the need for discs still exists. Perhaps the added convenience of more locations will help Redbox survive into the extended future.
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