Redbox Instant Launches, but Rivals Already Far Downstream

Redbox Instant, the joint venture between Redbox and Verizon to add streaming video services to the DVD rental company’s offerings, launched this week to help the company better compete with rivals Netflix, Amazon Instant Video and Hulu.

The company announced a beta test period for the service last December, after announcing the Verizon partnership in February 2012. The three-month test allowed select customers access to more than 4,000 on-demand video options, and DVD or Blu-ray rentals from more than 36,000 Redbox kiosks around the country.

Following a one-month free trial, Redbox Instant will cost US$8 per month. That’s the same price as Netflix’s monthly streaming services, although the Redbox Instant deal also includes four nights of DVD rentals from local kiosks. For an extra dollar per month, users can get four nights of Blu-ray rentals.

Subscribers can access the service from apps for Android and iOS, smart TVs from Vizio, LG, Samsung or Google TV, as well as Xbox 360.

Redbox did not respond to our request to comment for this story.

Uphill Battle

Redbox Instant said its new service is targeted towards consumers that are still looking for a mix of physical rentals and streaming services. There is a segment of the market that demands both of those options, said Peter Koeppel, founder and president of Koeppel Direct.

“I think they have name recognition for their brand and could carve out a niche among customers that use physical rentals and want to add streaming,” he told the E-Commerce Times. “There still is a segment of the population that supports Redbox, and I think this would be their prime target audience.”

That audience might not be big enough, however, to keep Redbox Instant in business for long, said Alfred Poor, author of the HDTV Almanac and analyst with GigaOM Pro. Netflix introduced its customers to both streaming and physical rentals right from the start, but people picking up a Redbox DVD at the local gas station or supermarket might do so because they don’t have already have a smart TV or on-demand services.

“It’s got an uphill climb on all counts,” Poor told the E-Commerce Times. “Redbox’s market is spur-of-the-moment, value-driven, dollar-per-night rental sales at places like a McDonald’s or a grocery store. It’s unclear how tech and broadband-oriented its customers are. It’s not really a logical step for Redbox’s market.”

Redbox’s streaming content offerings are significantly fewer than competitors Netflix and Amazon Instant, said Koeppel, and it doesn’t have the deep pockets to bid on popular new content. In addition, unlike Netflix or channel-specific services such as HBO Go, Redbox Instant doesn’t have immediate plans for original content.

“It’s a competitive marketplace and it may be difficult for them to gain traction with a limited library of movies that some competitors also offer,” he pointed out. “Another drawback is that Redbox Instant doesn’t offer higher profile, exclusive titles that could be used to attract customers from their competitors.”

Not Enough Big Data

A tiny library and tough competition aren’t the only hurdles for RedBox Instant, Poor said. The company’s challengers are also years ahead of Redbox when it comes to gathering data on consumers. Netflix and especially Amazon have been able to track user habits and offer suggestions for their next purchases or rentals.

Redbox Instant will suffer without being able to give its customers spot-on suggestions like its competitors can, he said.

“One of the big things that drove Netflix’s success on the physical DVD side was to make recommendations about what you should watch, and they continued that with streaming,” Poor noted. “It’s a complicated problem because you need to know both about the content and the attributes of the person watching. It’s an enormous amount of data on both sides, and it’s very complex to manage that, and Netflix and Amazon have a huge head start.”

Buffering for a Buyout?

Redbox still likely understands that a company would have a tough time competing in the current entertainment industry if it didn’t have some type of online option.

“The days of physical media are clearly numbered,” said Poor. “RedBox is probably smart to try to start building an exit strategy, but this doesn’t play to the strength of their market, or the strengths of the company.”

The company could be positioning itself as a future buyout target for a larger player in the space.

“When you don’t have what you need, though, you either buy it or get bought, and that’s probably ultimately where Redbox is headed,” he added. “It’s entirely plausible to me that this is an attempt to wrap up as much of their market and make themselves a target for a competitor that wants to advance their business.”