Will Death of Blockbuster Kill Redbox?

by Braden Kelley

Will Death of Blockbuster Kill RedboxLet’s examine something that has been bothering me for a little while. I’ve been renting my movies from Blockbuster and Redbox for years, but now my local Blockbuster store is closing. When I’ve expressed this sadness to friends and colleagues, people just tell me to get Netflix.

Let’s dig quickly into the psychology behind the Netflix/Blockbuster/Redbox choice that each of us has been making. Now, I’m a big fan of technology, but it has its limitations. One of those limitations is that technology can isolate people from the real world. I know all you social media zealots and self-proclaimed experts out there are shouting ‘heresy’ back at me, but hey, that’s why there is a comments box down at the bottom of each article here—for people to engage in a wee bit of dialog.

While social media does serve to connect people, it also serves to disconnect them. To read more on the double-edged impact of social media you might want to check out the book Alone Together: Why We Expect More From Technology and Less From Each Other by Dr. Sherry Turkle.

Layered on top of the tensions between technology, psychology and social interaction is that people are as different as they are the same. As much as we like to think we’re all individuals, when it comes to market dynamics, we tend to be different. That’s why we segment our customers into groups for marketing purposes, test for personality types in team situations, and create separate brands for different groups of customers.

Given all of this, there is an impact of Blockbuster going out of business that I don’t think many people are anticipating, and that is the likelihood that Blockbuster’s demise will actually accelerate the demise of Redbox. This is because, unlike the assumption most people would make, Blockbuster and Redbox are more complements than substitutes. When Redbox emerged people used it as an arbitrage against Blockbuster to get cheaper rentals from Redbox while still retaining the pleasure of physical browsing and the selection advantage Blockbuster provides over Redbox.

For some of us, we just like to get out of the house and see things, touch things, interact with physical things, and to share the purchasing experience with others—especially when it comes to choosing family movies with our kids. Seeing my daughter sprawl Scooby Doo movies all over the floor, touching them, comparing them, examining them, stacking them, putting them back, chatting with me, and several other physical and social interactions can just not be duplicated online. For some people, this is a huge positive. For others, it is actually a negative. Again, people are different, but in similar ways.

But for movie rental customers like me, what happens when Blockbuster goes out of business?

Suddenly, I’m limited to pushing buttons to get one of the few kids movies or new releases Redbox has without the Blockbuster selection to fall back on. The Blockbuster/Redbox combination for me was superior to Netflix, but when you take Blockbuster out of the equation then suddenly Netflix starts to look like the better option.

Uh oh.

So what happens to Redbox if the group of people like me that have been keeping Blockbuster afloat think that Netflix is now the superior solution in a post-Blockbuster world?

The answer is that Redbox is likely to follow Blockbuster out of the market in the next 3-5 years and the Blockbuster/Hollwood/Netflix/Redbox quartet will be replaced by the Amazon/Netflix/iTunes trifecta (with direct rentals from movie studio websites as the great unknown).

Amazon and Apple already sell AND rent movies and while many people out there may not know that they RENT movies, they have the opportunity to build up their awareness and possibly to also introduce subscriptions as Blockbuster and Redbox exit the video rental market.

The reason that Netflix will continue on as the leader in the market while their two major competitors fail is that they had the courage not just to try and disrupt Blockbuster and Hollywood, but also to try and disrupt themselves. To magnify this point, I dare you to try and find their disc mailing plans on their site—go ahead, I dare you. Even though mailing discs is what made them successful, they now want nothing to do with it if they can get everyone to transition to digital distribution.

Each innovation you come up with has a lifespan, so you have to stand ready to innovate again, even if it means disrupting yourself. This is the courage that innovation excellence requires.

Does your organization have the courage to not just disrupt the competition but to disrupt itself?

This post may also be viewed on the American Express OPEN Forum Idea Hub.


'Stoking Your Innovation Bonfire' shipped to nearly 90 countries

Don’t miss an article (2,400+) – Subscribe to our RSS feed or join us on LinkedIn or Facebook.


Braden KelleyBraden Kelley is the author of Stoking Your Innovation Bonfire from John Wiley & Sons. Braden is also the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy.

No comments

  1. do a search on twitter for redbox – Redbox is huge for spur of the moment rentals. Netflix cannot provide that. Online rentals can but at a 300-500% premium. Redbox will be around as long as the prices online are significantly higher.

  2. Another advantage factor about RedBox is that people don’t have to “commit” to anything. One of things that keeps some people from Netflix is the monthly charge (albeit minimal). I can go to Redbox a couple of times a month, spur of the moment, and it only costs me a couple of bucks. Our local Redbox gets so much business, they’ve added multiple ones in other locations. I think RedBox has a bright future (for now) as cheap, accessible entertainment with no real commitment. It’s convenient, and my kids don’t want to wait a couple of days when they’re right there at McDonald’s making that “spur of the moment” video choice.

  3. Yes, Redbox is toast long term but in the short term they can only benefit from the demise of Blockbuster. People who don’t want to subscribe and who like the feel of the DVD (wasn’t that the point YOU were making?) will migrate to Redbox until the digital solution is cheaper or easier or requires less of a commitment.

  4. Of course Netflix will benefit from losing a competitor! The problem is that Netflix currently does not have the ability to meet the needs of the consumer that does not have the internet capability to adopt their digital subscription nor the impulse consumer. Finally, the consumer that wants to provide a movie experience at a location other than their home would have to rely on a brick-and-mortar physical location to obtain the movie somewhere (either that or buy the dvd which is not exactly price sensitive to the consumer).

  5. You left out an important factor. Family Video. They are not going anywhere. In fact if you look at their web site they are opening stores not closing them. I am a huge loyal fan and have been for over 10 years. Like the article states, I do like to browse and read the boxes. I don’t mind getting out of the house and asking the clerks their for their opinions. My kids love the free movies as do I. And, let me repeat that, And they have the new movies right away. I don’t have to wait for the studios to allow Redbox to rent them. Redbox has never been an option for me. Nor has Netflix. I’ve heard many of my friends complain about Redbox not having the movie they want or the machine is full. I don’t have to worry about that when I walk into Family Video. Do your researd, the video rentals stores are not down and out!

  6. Don’t be sad about the demise of Blockbuster. I worked for them during the past year and to put it plainly… they deserve this. They should have pioneered ideas like Redbox and Netflix. Now, they put all the pressure and blame on their CSRs to get sales and “save” the company, however since they filed for bankruptcy they just aren’t getting the business they used to. Don’t feel bad, let Blockbuster die.

  7. You are leaving out a huge component to this equation: bandwidth limits. While those of us with Netflix are enjoying all the instant streaming options available to us, we have ISP’s looking at any way possible to limit our access to online video. Throttling, tiered pricing, and especially bandwidth caps may kill the streaming revolution if they become standard practices for ISPs. Every time someone proclaims the death of physical media, I think of this and tell them to tap the brakes.

  8. One problem I have with redboxs in my area is that I feel unsafe while I’m picking out a movie most of the time. Therefore I am rushed to make a decision and feel pressured when I’m up to pick. I don’t appreciate this pressure and would rather avoid the sketchy situation all together unless I’m with others. I’d much rather go to be in the comfort of my own home where I feel secure and can take my time to make a selection. After all I go to rent a movie when I want to relax!

  9. “One problem I have with redboxs in my area is that I feel unsafe while I’m picking out a movie most of the time”

    Umm its not an ATM. take you time and pick out what you want to watch. Not sure how you feel pressured by a kiosk.?.?.?

    Blockbuster closing will do nothing more than provide more business to Redbox.

    Blockbuster failed because of rising prices and their need to make more money by raising those prices among other things.

    This post by Brandon in general is rather amusing.
    “So what happens to Redbox if the group of people like me that have been keeping Blockbuster afloat think that Netflix is now the superior solution in a post-Blockbuster world?”

    Come on Brandon, do you think that your the masses and you have followers that will put Redbox out of business? The group of people you talk about will go wherever they wish to rent, but the botton line – 30,000+ Redbox Kiosks and counting!!!

  10. Yay!

    So many great comments.

    I will try and address your comments the best I can:

    1. I agree that Blockbuster deserves to perish for not being more strategic and trying to figure out where the value is and then focusing relentlessly.

    2. If you don’t have broadband, then sure Redbox is better than nothing. If you do have broadband then over time as I stated in the article, the Redbox only solution will seem inferior and eventually you will be tempted to Netflix or another solution. For me this was the case and now for $10 a month I can watch as many movies as I want instantly (of course only a small % of Netlix’s inventory is available this way) and I can have one disc out at a time – theoretically allowing me to have 8-10 discs a month (pretty much any movie I want) for $10 plus the movies that they do have available via the internet.

    3. The big risk for Netflix is the same risk Redbox faces – access to movies. The movie studios control access and I have no idea how long the Starz! back door that Netflix is using for their on demand movies will last.

    4. I don’t think that I have the power to put Redbox out of business, nor am I trying to (they’re a local company in this part of the woods). The point I’m making is that Redbox benefits more by Blockbuster being in business than by them being out of business (despite what some of you think) because Blockbuster’s selection backstop made a physical movie only solution more valuable than online/offline Netflix solution for some people. Markets are driven by value and experience, and I think the disappointment that increased Redbox traffic and limited selection will cause actually accumulate over time and inspire changes in behavior. They have for me.

    All the best,

    Braden
    @innovate

  11. Did you ride your horse-and-carriage when you went to physically rent movies? Did they have a place to hang your stovepipe hat?

    It’s OK, I feel for you. I bet a lot of people went through the same sort of emotions when the printing press put all the scribes out of business. Oh, I long for the days when one could simply give a scribe a hand-written book, and that scribe would hand-write another copy.

    Stupid progress.

  12. Who can afford a horse these days with the price of oats what it is?

    Are you crazy? I walked.

    It felt good outside. A good walk opens the creative mind and gets me away from all the linear thinking that screen time encourages. 😉

    From your note I will take it that you’re in agreement that Redbox’s honeymoon is now over, and Blockbuster’s demise will push people to Netflix or other at least partially-digital options.

    All the best,

    Braden
    @innovate

Leave a Reply