Redbox offers $1 DVD rentals through its bright-red vending machines — and, as always, Hollywood feels threatened:
“These machines are to the video industry what the Internet was to the music business — disaster,” said Ted Engen, president of the Video Buyers Group, a trade organization for 1,700 local rental stores.Mr. Engen is enlisting lawmakers to attack Redbox for renting R-rated movies to underage viewers — the machines simply ask customers to confirm that they are 18 or older by pressing a button — and trying to rally the Screen Actors Guild and other unions.
“It’s going to kill the industry,” said Gary Cook, business manager for UA Local 78, which represents studio plumbers.
Redbox is riding several trends:
For starters, the dismal economy has made people think twice about buying DVDs, especially as the likes of Redbox have made renting easier. Consumers are also tiring of the clutter: The average American household with a DVD player now has a library of 70 DVDs, according to Adams Media Research.Over all, DVD sales are down 13.5 percent for the first half of 2009 compared to the first half of 2008, according to the Digital Entertainment Group, a trade organization. Studios say some new titles are selling 25 percent fewer copies than expected. Rental revenue is up about 8 percent over the same period, according to the group.
Retailers, struggling to keep people shopping, have realized that having a DVD kiosk in a store creates foot traffic, making it easier for companies like Redbox to sign wide-ranging installation agreements. Some partners, like Walgreens, have offered discounts that essentially make rentals free.
Redbox currently buys DVDs wholesale, rents them repeatedly for $1 per day, and then sells the DVDs into the used-DVD market. This upsets the studios:
By signing deals with Redbox, Paramount and Sony got the kiosk operator to agree to destroy their discs rather than resell them.