A corporate strategy article by Thunderbird students Cole Augustine, Cynthia Austin, Bradley Carson, and Jennifer Long
Redbox has seen a meteoric rise to the top of the movie rental business, despite their focus on a dying form of media. As the company’s built in expiration date draws closer, Redbox must ask itself, “What Now?” This article will provide an overview of how Redbox got to the top, a preview into the future of the video rental industry, and suggestions for how Redbox can stay relevant in a changing industry.
In the midst of huge losses amongst video rental companies such as Blockbuster and Hollywood Video, Redbox emerged as an innovator by targeting a low price strategy and partnering with other companies known for value to increase volume. Originally a subsidiary of McDonald’s, Redbox entered the market with $1 DVD rental kiosks in many high traffic McDonald’s locations. The Redbox $1 DVD rental price point aligned well to the low income McDonald’s target market, and paying per DVD rental (transaction-based pricing) reinforced the low priced model, translating consumer spending directly to consumption (rather than a subscription-based pricing model where the consumer pays regardless of consumption).