Redbox To Rent Video Games in Kiosks. Too Bad Everyone's Getting Them Online
Redbox's decision to rent video games from kiosks as it does with movies is a very sound one. For the short term. In the not-too-long term? Well, not so much. Just turn on your TV to see why.
Redbox announced last week it would start renting games for $2 a night, twice the price it charges for movies. There are more problems with this business model than you can shake a joy-stick at. First, as BNET's Damon Brown said about Redbox's trial run last fall, "The most popular games are sprawling epics like Halo and they require several hours, if not days to complete." If an average person can get all there is to get out of a game in a single day, then it's unlikely to be very popular.
So basically that means what Redbox is providing is a way to try out a game before you buy it. Many (most?) games these days provide online demos for doing just that. This is practically a requirement for online distribution. (Which isn't to say there aren't a few cases where this would work: Anyone who actually bought the latest Duke Nukem would have been overjoyed to only have lost $2.)
Redbox's long-term challenge
This underlines what is the biggest long-term challenge for Redbox: Digital distribution. When Netflix (NFLX) can stream all of its content it will kill off the red envelopes in a heart beat -- and very few people will complain. Now e-readers like Nook and Kindle are a much bigger threat to bookstores than Barnes & Noble (BKS) and Amazon (AMZN) were before.
Everyone else in gaming already knows this. Sony (SNE), Sega (SGAMY.PK), and Microsoft (MSFT) would kill to figure out a way to let people download consoles. GameFly, the gaming world's equivalent to Netflix's mail service, is hoping its price value ($10 lets you keep a game for a month) is enough to keep it in business.
The only reason Redbox is doing this at all is that it is a division of Coinstar (CSTR), a company that lives and dies on being able to find uses for store-based kiosks. Video game rental is not going to prolong its life expectancy.
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