Redbox SWOT Analyisis

On the horizon, Blockbusters number of competitors should steadily increase from new emerging technologies. If Blockbuster extends into the realm of VOD, Legal Movie Downloads, or Digital Video Recorders (DVR), it must realize there are existing and powerful players in these markets already. This new technology is shaping the market for many deals or partnerships. They will face fierce competition, but in the future, Blockbuster must not find it self on the outside looking in.

The movie rental industry is a living industry; there are constant changes with advances in technology, rights management, and the slow, but steady, move away from physical Media. Companies such as Netflix, Hulu, RedBox, and Blockbuster are being forced to look at new business models and try to keep up with these changes.

Blockbuster implemented a new strategy for customers to access their rentals in “five channels of distribution: in-store, by mail, through vending machines and kiosks, online, and at home (direct to the TV)” (DATAMONITOR, 2009). However, this strategy was a reactive approach to the problem produced ten years behind schedule. Wooldridge et al., (2007) stated that Blockbuster should select and adapt their strategy to respond to the fast changing market and maintain a competitive position. This was an obvious failure for Blockbuster. The changes in the market produced a decline in profit at a faster pace than the strategies that Blockbuster implemented to combat these losses.

While Redbox is one of our biggest competitors for viewers, it seems that the DVD rental market is on a downward trend. Therefore it is probably best to focus on companies that are intent on delivering video streaming. One recent player in the market is Sling TV, which is a subsidiary of Direct TV, and they have an offering of content that covers an area of entertainment that we have not been able to crack into (Katzmaier, 2015). They stream live cable programs such as AMC, TNT, TBS, Disney, HGTV, Cartoon Network, and ESPN to users for twenty dollars a month. While they are still subject to commercials and do not offer the ability to fast forward on certain channels, their product offering is one that differs enough from Netflix to cause

Redbox also has segmented the market by behavioral Segmentation; it has placed its kiosk at location as they are frequently visited by the common mass. It has not placed its kiosks at museums or exhibition, as not many people go there on a regular basis.

Blockbuster used to have so much power in the movie rental industry until Redbox and Netflix have come to the market. One of Porter’s five forces

The third issue affecting Netflix is the age of movies that they offer to their customers. Netflix cannot deliver the newest movie titles online because they are not offered through VOD for at least a month after they come out on DVD. This is a huge disadvantage to their customers that exclusively use Netflix’s online service. This is the only advantage that Blockbuster still has over Netflix, because if someone wants to see a movie the day that it comes out on video then

Blockbuster Entertainment, Inc. was once a highly successful and profitable brick and mortar home movie and video game rental store. At its peak in 2004, Blockbuster had up to 60,000 employees and more than 9,000 stores. The idea behind Netflix came from an unsatisfied, embarrassed customer of Blockbuster, Mr. Reed Hastings, now CEO of Netflix, paid a $40 late fee because he returned the movie Apollo 13 six weeks later (Zarafshar, 2013). He began to contemplate ingeniously about a notion to change the movie-leasing pattern into a more pioneering industry. In 1997 Netflix was started as a DVD rental-by-mail business without subscriptions. In 1999, taking a stride additional in the direction of evolving the industry, Hastings began the subscription-based business mode based on renting DVDs by mail with plans reliant on the quantity of titles taken at a time. Netflix put forward 120,000 titles for limitless monthly DVD rental with free shipping no late and per title fees. Since that time Netflix has become one of the most popular subscription services in the world, and is now valued at over $28 billion and steadily increasing. What factors contributed to the success and failure of these two companies?

The main suppliers for the Redbox and other movie rental business are the movie production houses which own the copyrights of the movies produced by them. Three major studio houses 20th Century Fox, Warner Brox and Universal separately refused to sell DVDs to Redbox atleast 28 days after their arrival in stores. Other major studio houses, Sony Pictures, Paramount Pictures and Lionsgate signed distribution deals with Redbox. Since Redbox’s business model largely relies on new releases, “windowing” of new releases by the three studios may make Redbox’s business model unviable. Redbox responded by filing lawsuits with three claims against these companies - copyright misuse, tortuous interference and antitrust claims. In August 2009, a federal judge rejected the first 2 claims but allowed the antitrust claim to continue. Earlier this year, Redbox dismissed the lawsuits and reached and agreement

2. What forces are driving changes in the movie rental industry? Are the combined impacts of these driving forces likely to be favorable or unfavorable in term of their effects on competitive intensity and future industry profitability?

I wouldn’t raise the price if I was the adviser for Redbox. First, Redbox will need to examine why they are in business. They started their company by studying their competition and know that people did not want to pay too much for renting a movie. Secondly, Redbox need to observe the oligopoly market, there is not many people today that is in a high demand to rent DVD’s. When Redbox started their company, time was changing in the world. Yet, the time doesn’t stop for anyone. Today, more people are streaming movies from their phones, computers, and tablets. Lastly, Redbox will need to do more marketing by using promotion, advertising, and coupons (Ferrell L. & Ferrell, O. C., & Hist, 2015 p.7). Redbox must keep up with their competitors and

Redbox is an easy way to rent and watch DVDs, Blu-Ray Discs and Video Games via automated kiosk or electronic device based streaming video. Kiosks are located at select fast food restaurants, grocery stores and convenience stores. Each Redbox kiosk holds approximately 630 DVDs/Blu-ray Discs/Video Games. DVDs rent for $1.20 per day, Blu-ray discs at $1.50 per day

The subscription method and pricing for each movie service is a very important difference. Although both are movie services, Netflix is a subscription based system and Red Box is a rental system. With Netflix, the membership is guaranteed to anyone with a debit card that can pay the automated monthly-subscription. Included in this subscription is access to the Netflix website to watch an unlimited amount a movies and series. However, with Red Box being a movie-rental service, any person can also watch movies and series but for a specified price, they can only rent the DVD from the kiosk, to be returned within an allotted time. As a matter of fact, Netflix also has available DVD rentals, for an extra fee, that can be mailed to the person’s home

One the one hand, the fertility of the industry opened the doors to corporations that sighted substantial growth potential. New entrants with big pockets such as Walmart could pose a certain threat to Netflix, by exploiting a playing card based on cost reduction. On the other hand, barriers to entry became relatively significant as established video rental retailers such as Netflix have the experience and the knowhow to market movies to people. In this industry, firms that do not have a technological advantage can’t compete. The best example is Netflix’s CineMatch program that offered personalized film recommendations based on customer’s rental patterns. This way, Netflix was able to better serve its subscribers. From a cost perspective, the movie rental industry requires high capital expenditures, and the major expenses are highly related to acquisitions of DVD library and investments in technology (exhibit 2 continued). Thus, we may say that entry is difficult in this industry as the competing firms have reputation, experience and recognizable brand names.

The appeal of Redbox is the low cost of DVD rentals and increasing the price might be risky, but as adviser to the Redbox CEO the proposal to raise the price of videos from kiosks will be a good idea. The increase is still a cheaper option than the monthly cost of live-steaming networks or going to the movie theater. Raising the price is helping offset the raising cost which includes debit card fees. Debit cards are the main transaction for customers renting from Redbox and there are substantial fees for using those cards. It will also allow Redbox to increase the number of kiosk available with new locations. “ …the company's plans to deliver greater access to Redbox® kiosks with the addition of 1,500 net new rental kiosks in 2017” (PR, 2017).