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Redbox Falls Flat in Streaming Space

Mari Silbey
5/27/2014
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Timing is everything. While Netflix has made a (relatively) graceful transition from a DVD rental service to an online streaming powerhouse, Redbox is finding it difficult to follow a similar path several years later.

According to The Wall Street Journal (subscription required), Redbox Automated Retail LLC will remove more than 500 of its retail kiosks throughout the US this year. The move comes after the company registered revenue increase of only 3% to nearly $2 billion in 2013 and shows no signs of growth in 2014. Likewise, Redbox's operating income flattened out at $239 million last year.

Worse for Redbox, the company appears to be having trouble gaining traction with its online streaming video service. Parent company Outerwall Inc. said in February that Redbox Instant by Verizon added customers last year, while also increasing overall rental transactions and average monthly streaming times. However, the company declined to disclose any numbers, and executives said they would have to work with partner Verizon Communications Inc. (NYSE: VZ) to determine the best way to share details in the future. (See Redbox Instant Grows, But How Much?)

The WSJ now suggests that the detailed picture isn't pretty. At least compared to its much larger rival, Netflix Inc. (Nasdaq: NFLX), Redbox's subscriber numbers are low, and there's no clear strategy in place to reverse the company's streaming fortunes.

Even as Redbox stumbles, other companies are still investing heavily in their own over-the-top video offerings. Amazon.com Inc. (Nasdaq: AMZN) is using its deep pockets to commission original content for its Amazon Instant Video service. The online retailer also continues to seed the consumer market with its lineup of streaming hardware products, including the new Fire TV. (See Amazon Joins Video Streaming Wars.)

Meanwhile, Comcast Corp. (Nasdaq: CMCSA, CMCSK) is quietly but steadily building up Streampix, its own OTT subscription rental service, and AT&T Inc. (NYSE: T) recently partnered with The Chernin Group in a joint $500 million venture to "acquire, invest in, and launch online video businesses" later this year. (See AT&T Joins OTT Video Parade.)

Dish Network LLC (Nasdaq: DISH) also has plans in the works to launch an OTT service with content from Walt Disney Co. (NYSE: DIS) -- including TV shows from Disney-owned networks like ESPN, the Disney Channel, and ABC -- and other programmers as early as this summer. (See No Mickey Mouse Deal for Dish.)

— Mari Silbey, special to Light Reading

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
5/29/2014 | 2:01:52 PM
Re: Why?
KBode - As Steve Jobs said, innovation and creativity means saying "no." But multibillion-dollar-companies aren't good at that. Too many stakeholders have a claim to the user screen. The result is a cluttered user interface as everybody inside the company fights to get their pet project included. 
KBode
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KBode,
User Rank: Light Sabre
5/28/2014 | 3:53:04 PM
Re: Why?
True. They really struggle with graphic user interfaces, but executives always seem to assume that it shouldn't be that hard if they're willing to just throw money at it. But you don't just magically go from a phone company with a focus on turf protection to a disruptive innovator in a new field by magic. They don't seem to recognize this, and you see the same scenario play out over and over again...
Mitch Wagner
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50%
Mitch Wagner,
User Rank: Lightning
5/28/2014 | 3:37:26 PM
Re: Why?
Service providers seem to have difficulty providing applications. For example, they can't make a DVR people like as much as TiVo. 
pcharles09
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50%
pcharles09,
User Rank: Light Beer
5/27/2014 | 7:56:00 PM
Re: Why?
I think their market position is viewed as a 'grab a DVD from outside the supermarket'. It's hard to shift that to something else. Not to mention -- expensive.
wanlord
50%
50%
wanlord,
User Rank: Light Sabre
5/27/2014 | 4:10:05 PM
Re: Why?
Look at it from a subscriber perspective, if I am into online streaming, chances are I already have an account with Netflix, so what is going to pursuade me to switch or add, and now pay for yet another service and looks to have less compelling content, and the fact that Netflix has some pretty good orginal shows right now (OITNB, HOC)? I never understood why Redbox "needed" to partner with VZ in the first place. They are still doing OTT, so what value does being part of VZ add, other than you just lost advertising to 5M potential FiOS TV subs for reasons Kbode mentioned.
KBode
50%
50%
KBode,
User Rank: Light Sabre
5/27/2014 | 2:38:23 PM
Re: Why?
I think they've just run out of growing room on the physical space. And in the streaming space Verizon has a vested interest NOT to promote this service too much in order to avoid cannibalizing traditional FiOS TV viewers and encouraging cord cutting. I get the feeling that AT&T, Comcast and AT&T offer "me too" Netflix-esque services to give the faint impression of being innovative, but they in reality don't want them to succeed or disrupt.
Mitch Wagner
50%
50%
Mitch Wagner,
User Rank: Lightning
5/27/2014 | 2:27:58 PM
Why?
Any indication why Redbox is stumbling here where others are doing well?
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