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Redbox Eyes Video Streaming -- but It's a Terrible Idea

Redbox President Mitch Lowe announced that his company will also offer a subscription-based Internet streaming option to customers. Redbox is known for its DVD and Blu-Ray-filled red boxes kiosks stationed at 7-Elevens, airports, and other venues, but now it's looking to enter a field dominated by Netflix, Blockbuster (BBI) and, soon, Amazon (AMZN). Redbox may fear that DVDs are dying, but entering the streaming video arena right now will spread the start-up too thin and potentially leave customers behind.

Already diversifying enough
Redbox has launched two big initiatives over the past year: Blu-Ray rentals and video game rentals. Blu-Ray rentals were a smart risk: It costs the consumer more to rent Blu-Rays ($1.50 per 24 hours versus $1.00 for DVDs), but those two quarters give a higher quality movie experience that most would pay. Secondly, it helps Redbox transition itself out of DVDs and into Blu-Ray.

The video game rentals are a different story. As I discussed last fall, the video game program (which charges $2 per game rental) put Redbox against longstanding online game rental company Gamefly and, by doubling the price of rentals, lowered the chances of an impulse buy.

Unfortunately, a Redbox streaming video option would be closer to the video game rental initiative. First, it throws the relatively young company into battle with several titans, all of which could afford to drop monthly subscription prices to a level Redbox couldn't match. Second, it will require Redbox to rebrand itself, as it now thrives on impulse purchases -- see a Redbox at the corner store, grab a movie for the night -- as opposed to a preplanned, thoughtful purchase like a monthly movie subscription.

Can the core audience come with Redbox online?
Redbox needs to think hard about whether its core audience is likely to follow it online. It's running into the same dilemma as Netflix: How to satisfy DVD and Blu-Ray customers while weaning them off of dying mediums. Like Netflix, Redbox will have to face that only two out of every three Americans has access to broadband Internet, which is pretty much required for watching movies online.

Redbox has a heavier presence in suburban and rural areas, so theit probably has more current customers without broadband access than, say, Netflix. How many current Redbox customers will follow the company online? Probably not many, and Redbox should really focus on cultivating its connection with DVD and Blu-Ray watchers still dismayed by Blockbuster and other chains closing.

Photo courtesy of zyphbear // CC 2.0

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