Redbox, which built its business on renting DVDs from storefront kiosks, is thinking outside the box with the launch of a new video streaming service.
Taking on Netflix, Amazon and a growing list of competitors, Redbox On Demand offers more than 7,000 movie and TV titles, including new releases. Content will come from most major studios, including Warner Bros., Paramount Pictures, Lionsgate, Sony Pictures, 20th Century Fox and Universal Pictures.
Prices start at $3.99 for a two-day rental, with no subscription required. The service, which also offers video downloads for purchase, is available through mobile apps and the Redbox website, as well as Apple TV, Chromecast, Roku and other streaming platforms.
“This is an opportunity for us to augment and grow the business and capture a piece of digital pie,” said Galen Smith, CEO of Oakbrook Terrace-based Redbox.
Smith became CEO of Redbox last year after Apollo Global Management bought the struggling company for about $1.6 billion.
Founded in 2002 by hamburger giant McDonald’s, Redbox sales have slid in recent years along with the rest of the physical video rental industry, which fell 18 percent last year, according to the Digital Entertainment Group.
The move stakes out digital turf for Redbox, whose primary real estate has been at the entrance to grocery stores, dollar stores and other high traffic retail locations.
Despite ongoing decline in the physical video rental business, Smith said the on-demand service is a complement to its core business, not a successor.
“We think that digital is an important piece of our future, but it is both a physical and digital future,” Smith said.
Major video-on-demand players include Comcast and Apple’s iTunes, which offer video rentals at comparable prices. But Netflix, which reinvented itself from a DVD rent-by-mail service into a streaming video giant, is the most natural comparison for the new Redbox initiative.
This is not the first foray into digital streaming for Redbox, which three years ago rolled out a service called Redbox Instant. The short-lived subscription offering was aimed more squarely at the Netflix model, but it failed to gain traction.
Smith said the Redbox Instant streaming catalog couldn’t compete with Netflix as a subscription service. He believes the new offering, which doesn’t require a subscription and includes more new releases, will resonate with consumers.
“This is not Netflix,” Smith said. “(That) is a subscription service, and they do not offer new releases.”
“It’s going to be months, if not years, if not never” before some of the titles available on the new Redbox service are available on Netflix, he said.
Some of the featured on-demand movie titles available on day one include “Kingsman: The Golden Circle,” “Home Again,” “Detroit” and “All Saints.”
Redbox has 27 million customers in its loyalty program and will look to introduce the less digitally savvy among them to the streaming option, Smith said.
At the same time, the lower price point of the physical video rentals — DVDs start at $1.50 per night — provides a value proposition that will continue to have its place in the Redbox business model for the foreseeable future, he said.
In fact, the company has added 1,700 net kiosks to date this year, Smith said, with most landing in front of Dollar General stores. The company has more than 41,500 kiosks in all, which each house about 700 titles.
“We still see opportunity, that there is incremental demand for physical rental out there,” Smith said. “We just have to install the kiosks in the right place to address that demand.”
Adding a digital option, however, may be the key to the future for Redbox. And while it has a long way to go to match Netflix, which has become a Hollywood heavyweight, replete with its own original shows and movies, the prospect that Redbox may someday branch out into creating content is “not impossible,” Smith said.
“It opens up a whole set of new opportunities,” he said. “It’s a little premature … but we’re looking at every single avenue to explore.”