{{infobox company |company name	Redbox Automated Retail, LLC |company_logo |company_type Subsidiary of Coinstar |company_slogan |foundation 2002 |area_served North America |location Oakbrook Terrace, Illinois, United States |key_people Mitch Lowe, President |industry Retail/DVD rental |revenue | homepage redbox.com }}

Redbox is an American company that specializes in the rental of DVDs, Blu-ray Discs, and video games via vending machines. As of September 2009, Redbox had over 27,800 kiosks.

Kiosks feature the company's signature red color and arched top surface, visible in the corporate logo, and are located across the United States at fast food restaurants, pharmacies, university campuses, grocery stores and convenience stores.

A subsidiary of Coinstar, Redbox was ranked as the fifth largest DVD rental company by revenue in the United States in April 2007 by the Entertainment Merchants Association.

History

Redbox Automated Retail LLC was initially funded by McDonald's Ventures, LLC, a wholly owned subsidiary of McDonald’s Corp. In 2003 the company placed kiosks in four Washington Metropolitan Area locations that sold grocery items such as milk, eggs, and sandwiches. While Redbox withdrew the grocery kiosks within a year due to unpopularity, the DVD-rental kiosks it had also installed in the area succeeded, and the company changed its focus to that market. In 2005, Coinstar bought 47 percent of the company for about $20 million. In February 2009, Coinstar paid McDonald’s and other shareholders between $169 and $176 million for the remainder of the company.

The company passed Blockbuster in 2007 in number of U.S. locations and passed 100 million rentals in February 2008. Competitors include The New Release (aka Moviecube), DVDXpress, DVDplay, Instaflix and Blockbuster Express (NCR). DVD vending companies currently have 19% of the DVD rental market, with 36 percent to rent-by-mail services and 45 percent to traditional stores.

Mitch Lowe joined Redbox as Chief Operating Officer in 2005 after a period at McDonald's and co-founding Netflix. Lowe had experimented in 1982 with a short-lived VHS movie vending company named Video Droid. Mitch Lowe was named President of Redbox in April 2009.

On February 18, 2010, Redbox announced that they would begin renting out movies on the high-definition format Blu-ray Disc by mid 2010. The company is currently test marketing video game rentals in Reno, Nevada, Orlando, Florida, Stevens Point, Wisconsin, Austin, Texas, Wilmington, North Carolina and Corvallis, Oregon. In late 2010 Redbox announced they would ship video games to all locations. The games have been offered at machines as early as June 2011. Games for all major platforms are offered, including Wii, PlayStation 3, and Xbox. As of July 13, 2011 Redbox, which offers movies at $1 apiece for each night checked out, "now has more than 27,000 locations that are within a five minute drive of 60 percent of the U.S. population.

Kiosk design and operation

Redbox began in 2004, using re-branded kiosks manufactured and operated by Silicon Valley-based DVDPlay, at 140 McDonald's restaurants in their Denver and other test markets. In April 2005, Redbox phased out the DVDPlay-manufactured machines and contracted Solectron—a subsidiary of Flextronics, which also manufactures the Zune, Xbox and Xbox 360—to create and manufacture a custom kiosk design.

The company's typical self-service vending kiosk combines an interactive touch screen and sign. It uses a robotic disk array system containing a stacked carousel of DVDs and web-linked electronic communications. Kiosks can be located indoors or out and can hold more than 600 DVDs with 70–200 titles, updated weekly. The kiosks are built as modules, and in areas with higher sales figures, a second machine can be connected to the first one in order to offer a wider selection. The customer pays with a credit card or debit card. DVDs can be returned the next day to any of the company's kiosks; charges accrue up to 25 days, after which the customer then owns the DVD (without the original case) and rental charges cease. Customers can also reserve DVDs online, made possible by real-time inventory updates on the company's website. While customers can buy used DVDs from the kiosks (with unsold used DVDs returned to suppliers), Redbox estimates only 1% to 3% of the company's revenue comes from used disc sales.

A Redbox kiosk rents its average DVD 15 times at an average of $2 per transaction plus any applicable taxes. As of April 2007, kiosks had averaged 49.1 rentals per day and $37,457 a year in revenue.

Movie studio lawsuits

With growing concern in 2009 that DVD kiosks may jeopardize DVD sales and rentals, three major movie studios, 20th Century Fox, Warner Bros. and Universal Studios, separately refused to sell DVDs to Redbox until at least 28 days after their arrival in stores. Since Redbox’s business model relies upon new releases, and Fox and Warner Bros. represented 62 percent of home video rental revenue in 2008–09, analysts have said that this “windowing” of new releases by the three studios may make Redbox’s business model unviable.

Redbox responded by filing lawsuits, first, against Universal in October 2008, then against 20th Century Fox and Warner Bros. in August 2009. In these lawsuits, Redbox has asserted three claims against the studios: copyright misuse, tortious interference and antitrust claims. In August 2009, the federal judge hearing the Universal case rejected the first two claims, but allowed the antitrust claim to continue. While the judge found sufficient merit in the antitrust claim to allow the case to continue, some independent observers doubt it can succeed, since Redbox "must show that the studios worked together as a cartel... There is little evidence of an industrywide conspiracy." In October 2009, 20th Century Fox and Warner Bros. filed motions to dismiss Redbox's lawsuits against them, with Fox arguing that "antitrust law does not require a seller to provide its product through the distribution channel that the buyer demands, on the date that the buyer demands, or at the price that the buyer demands," and Warner Bros. saying that "This is precisely the type of routine business dispute, motivated solely by a merchant’s attempt to protect its profits rather than to protect competition, that the antitrust laws are not meant to address."

Other major studios, Sony Pictures, Paramount Pictures and Lionsgate, signed distribution deals with Redbox. The Walt Disney Company permits third-party distributors to sell to Redbox, but has not entered into a direct relationship with the company. Both sides of the studio lawsuits have pointed to these revenue-sharing deals to shore up their argument, with Redbox President Mitch Lowe saying "our growth can lead to theirs [the studios' growth]. For example, Redbox currently estimates we will pay more than a combined $1 billion over the next five years to Sony, Lionsgate and Paramount to purchase and then rent new release DVDs to consumers," while Warner Bros. says the deals are proof that far from being shut out by Hollywood, "Redbox’s business has thrived since its suit against Universal, underscored by lucrative distribution deals with Paramount Home Entertainment, Sony Pictures Home Entertainment and Lionsgate."

Redbox entered into an agreement with Warner on February 16, 2010, followed by Universal and Fox on April 22 of the year. In the agreements, which settle Redbox's lawsuits, Redbox agreed to not make available for rental films from these studios until 28 days after their initial home video releases. Redbox also improved their ability to make available Blu-ray Disc releases from the studio parties.

See also

Online video rental

Video store

References

External links

Official website

Category:Kiosks Category:Companies based in DuPage County, Illinois Category:Companies established in 2003 Category:Oakbrook Terrace, Illinois