The Redbox of Doom

It’s the cheapest legal way I know of to see one new DVD release and this, if you take their word on the subject, means doom for the movie industry.

In my area, it’s called Redbox, but other similar companies include DVDPlay, Moviecube and DVDXpress. The idea is that you pick a movie from the machine, put in your credit card and out pops a DVD. You are charged a low amount (usually $1) each day that you have it out. If you lose it, you are charged $25 for not returning it and that’s the end of the transaction.

These machines usually pop out around grocery stores and pharmacies, which are very happy to have people coming back to them every day with a chance of picking up a few extra items.

The machines make money because there is very little overhead and increasingly they are able to get DVDs at wholesale cost, so it takes very few rentals to make a profit. Finally, some of the owners of the machines sell the DVDs as used after they’ve been rented out for a while, so they make money on both ends of the arrangement. Consumers pay much less for renting the DVDs than they would from a rental store and much less for buying a used DVD then they would pay for it as new.

Of course, as the New York Times reports, not everyone is happy with this arrangement. 20th Century Fox, Universal and Warner Brothers are refusing to sell DVDs to Redbox until 28 days after a DVD has been released. The thinking goes that who will pay full price to buy a DVD or rent it from the cable company with the markup that they charge when they can get it from Redbox for a dollar.

Sony, who is one of the companies that has signed a deal with Redbox, got them to agree not to sell their DVDs as used and instead the destroy the DVDs after they left the boxes. This is probably one of the best solutions for both sides, as DVD rentals can still happen at a reasonable rate, but the movie companies won’t cannibalize sales of their DVDs.

It will be interesting to see the development of this market as Blockbuster plans to enter the market with their own line of kiosks.

Have you used these kiosks? Are they in your area? Let me know in the comments.

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