Why Redbox is the biggest movie-rental company you’ve never heard of? Its secret: the power of in-between technology.
Redbox — founded in 2002 as a division of McDonald’s and purchased by Coinstar this year — runs 15,000 machines in stores across the country and plans to have about 20,000 in place by the end of the year. Reed Hastings, founder of Netflix, the innovative darling of the movie-rental business, has called Redbox one of his most challenging rivals. “It’s really scary,” Hastings told The Hollywood Reporter in March.
Redbox is convenient and it’s cheap, but the company’s fortunes also rest on a more sophisticated calculation about the marketplace. Ask any entertainment bigwig where the movie-rental business is going and you’ll hear one thing: digital streaming. Amazon, Apple, Netflix, the cable companies, and many startups are gearing up to send every movie to your home on demand.
But Hollywood’s byzantine licensing structure precludes that from happening anytime soon. Redbox has positioned itself as the perfect in-between technology — the next best thing to on demand. It’s winning by being in more places than Blockbuster and faster than Netflix.
What’s surprising, though, is how much wizardry goes into making Redbox work. Each machine is connected to the Internet via DSL or a 3G cellular modem. This lets customers browse and reserve movies at their local Redbox through the Web, and return movies they rent from one Redbox to any other.
Each machine packs a sophisticated inventory-management system that determines how many copies of different new titles to order based on past performance of similar movies at that location. The kiosks send their inventory orders up to the mother ship every week, and Redbox’s technicians fan out to each kiosk to stock it with new DVDs.
“That’s the most interesting part — where technology meets old-fashioned field distribution,” Lowe says.
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Photo by Redbox.