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The benefits of Netflix over Blockbuster seem clear: Customers can chose their DVDs online, receive them in their mailboxes, and keep them as long as they want. But how do the benefits of Redbox compare to Netflix?

Redbox is a vending machine rental kiosk, located in McDonald’s locations, grocery stores, and convenience stores. Thus, to obtain the DVDs, customers still have to visit a retail location, but those locations are places the customers probably already visit, which makes the process easier than visiting a separate Blockbuster store. The rental fee is just $1 per day.

The 15,600 Redbox kiosks in the United States rent approximately 7.5 million movies weekly; Netflix currently rents 10 million. Redbox also offers a different selection of movies in an attempt to appeal to a different audience, namely, lower-income households with larger families. These consumers have no time to search thousands of movie titles that hold no interest for them, so Redbox makes the most popular titles easily accessible—usually physical comedies. Few of these titles show up in Netflix’s top 100 list.

Each Redbox contains 600 disc slots and usually carries 200 titles, with multiple copies of the most popular movies. In contrast, Netflix boasts 100,000 titles. But the kiosks have to ensure that they provide exactly the movie that a customer wants at exactly the moment that customer arrives at the kiosk. To improve stocking policies, Redbox allows customers to check a particular kiosk’s inventory on its Web site and reserve a copy.

Discussion Questions:

  1. Who will be most successful in the DVD rental market: Blockbuster, Redbox, or Netflix? Why?
  2. How might Netflix and Redbox use STP to enhance their sales and profits?

Randall Stross, “When the Price is Right, the Future Can Wait,” The New York Times, July 12, 2009.