Management 497- Redbox Case
Redbox is a company who enables consumers to rent DVDs at a cheap price of $1 per night, quick and efficiently through the use of a touch-screen kiosk. Redbox began as a subsidiary of Coinstar Incorporated, which was incorporated in 1993 in Delaware, and is a “self-service coin-counting kiosk where people can convert coins to cash, a gift-card, or e-certificates” (Thompson 295). In 2004, Redbox Automated Retail LLC began and was funded by a subsidiary of McDonald’s known as McDonald’s Ventures; therefore, the first DVD vending machines were located at McDonald’s fast-food chains. In February of 2009, Coinstar purchased 100% of Redbox ownership, acquiring all of their voting rights for about $168 million in total (Thompson 296). There were several reasons as to why purchasing full ownership in Redbox was appealing to Coinstar. To start, the growing revenue was about $50,000 per kiosk after only three years in business, and the return was projected to be very high (Thompson 296). Aside from financial benefit, customer feedback revealed that people were becoming fascinated with the low price and convenience of DVD rentals at Redbox, and “80 percent of Redbox customers [said they] would recommend the service to a friend” (Thompson 296). By this time, there were already about 12,000 kiosks and 6,000 to 8,000 more were planned to be established before the end of 2009 (Thompson 296). Redbox exceeded 365 million DVD rentals in 2009, and in May 2010 about 22,400 Redbox kiosks were already established in the United States, the United Kingdom and Puerto Rico (Thompson 295).
The successful strategy of Redbox was to “attract customers with a combination of low price and convenience, and rapidly expand the number of shopping locations with a Redbox kiosk” (Thompson 296). The price continues to play such a vital role in the success of the company because its $1 per night rentals beat out the...