History of Redbox Company – Case Study Example

HISTORY OF REDBOX COMPANY History of Redbox Company Redbox is a multinational limited liability company owned by Outerwall Incorporation, and that specializes in selling video games, Blu-ray discs and DVDs through automated kiosks. The company was established in the year 2002 under the ownership of McDonald’s Corporation. The idea behind its establishment was to create a larger customer base for McDonald’s through provide convenience to customers. The company established kiosks that would sell grocery items alongside DVD renting.
Until 2004, the idea of Redbox was still going through a lot of modification through market trial and testing. It was through this that the idea of DVD renting surfaced to be the most attractive and viable to customers hence its success. In 2004, Redbox launched its first operation in Denver at McDonal’s restaurant (Redbox, n.d). Most people embraced the new technology. Having achieved positive feedback from customers, Redbox extended to more than 700 other markets. Specific locations included; Houston, St. Louis, Salt Lake City, Baltimore and Minneapolis.
It was until 2005 that Outerwall Incorporation that was formerly known as Coinstar Incorporation expressed interest in investment in the venture. In November the same year, McDonald’s and Outerwall came into an agreement that gave the latter a 47.3 percent market share. In 2009, the remaining 52.7 shares that were initially owned by McDonald’s and other stakeholders were purchased by Outerwall using a maximum of $176 million. This move granted Outerwall exclusive ownership hence Redbox and McDonalds becoming separate companies.
The president of Redbox under this new arrangement was Gregg Kaplain. Redbox faced stiff competition from Blockbuster another limited liability company that specialized in the video game and movie rental services. Its other competitor was Netflix. In the long run, Redbox surpassed such competition by dominating the market.
Most changes occurred in 2006 and 2007. In 2006, Redbox came up with a technology that allowed customers to seek services online. In 2007, this technology was advanced even further to allow customers rent DVDs and return them to any location of their choice. It particularly included being able to select titles online and pick them at preferred Redbox location anywhere. Return time was also extended. By 2007, Redbox was established in more locations than its competitors (Redbox, n.d). 2008 saw an improvement in Redbox website as well as kiosk interface (Redbox, n.d). A search feature that offered categorization was introduced to the website. This new improvement eased the process of selection for customers. Nonetheless, renting was made more convenient and easier for customers (Redbox, n.d).
During the same period of 2008 to 2009, Redbox ran into lawsuit battles with three movie studios; Warner Bros, 20th Century Fox and Universal Studios (Speier, 2009). The suits were on grounds of antitrust claims, interference and misuse of copyright. Apart from the antitrust claim, the two other claims were rejected by the judge. However in 2009, Warner Bros and 20th Century Fox filed a motion to dismiss the lawsuit against them by Redbox. In 2010, the lawsuits were settled through an agreement with the two studios (Lawler, 2010). Redbox agreed that they would not rent out films from the studios before the end of 28 days from the date of release.
In 2010, Redbox began renting Blu-ray movies and by 2011, they were renting video games nationwide (Lawler, 2010). Just recently, Redblog was launched. This is an entertainment blog that allows customers to discuss and review films. It also increases customer awareness on new movies. By 2012, the company had more than 40,000 kiosks at over 32,000 locations. 2012 also saw the purchase of Blockbuster Company by Redbox for approximately $100 million together with the acquisition of more than 10,000 kiosks. Both products and services were purchased. During the same year, Gregg Kaplain seized being the president of Redbox through succession by Anne Saunders as the new president. In 2013, more than 50 percent of disc rentals in the United States were owned by Redbox (Monica, 2009).
Regarding profits, in 2007, Redbox had a 2.2 % market share. The margin increased to 9% and 13% in 2008 and 2009 respectively. In 2014, Redbox increased the rental prices for DVDs by 25 percent in that the initial price of $1.20 was increased to $2 for Blu-ray disks and $2 to $3 for video games. As a result, the profits of Outerwall increased to 12 percent (Morgan, 2014). Shares began to trade at $71.39 per share. Despite the competition from other companies, Redbox still has an upper hand. Profits are expected to grow at a rate of over 15 percent each year (Morgan, 2014).
Redbox continues to focus on offering the best services and meeting the demands of its customers. The efforts of both customers and company’s shareholders are the major factors that have enabled Redbox to realize these profits. To date, other improvements have continued to take place something that has widened the customer base.
References
Conneally, T. (2009). $1 Rtentals are not Too Cheap: Redbox Sues 20th Century Fox. Betanews. Retrieved from http://betanews.com/2009/08/12/1-rentals-are-not-too-cheap-redbox-sues-20th-century-fox/.
Lawler, R. (2010). Redbox to Rent Blue-Ray Discs for $1.50 a Night. Gigaom. Retrieved from https://gigaom.com/2010/06/07/redbox-to-rent-blu-ray-discs-for-1-50-a-night/.
Monica, P. (2009). Redbox: Media Public Enemy No. 1. United States: CNN Money. Retrieved from http://money.cnn.com/2009/08/27/markets/thebuzz/index.htm?postversion=2009082713.
Morgan, R. (2014). Redbox Jacks Prices by 25 Percent. New York: New York Press. Retrieved from http://nypost.com/2014/11/25/redbox-jacks-up-prices-by-25-percent/.
Redbox (n.d). The Redbox Concept. Redbox Press. Retrieved from http://redboxpressroom.com/factsheets/TheHistoryofRedbox.pdf.
Speier, M. (2009). Flurry of Lawsuits Puts Redbox in Spotlight. Retrieved from http://www.thewrap.com/deal-central/article/flurry-lawsuits-puts-redbox-spotlight-5338/