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Digital Competition Gets Physical

19 Mar, 2013 By: Stephanie Prange

Redbox has unwrapped its new digital offering, Redbox Instant by Verizon, for public consumption, and it offers a unique subscription at a competitive price.

While most analysts have concentrated on Netflix’s first-mover status, greater content and flashy recommendation engine as its ace in the hole in the digital age, I have always contended that one of its greatest advantages was its cheap subscription price. For $8, streaming consumers can access content that satisfies them enough to wile away a few hours a month. Now Redbox has matched that price — and has offered something more.

Indeed, while the content offering at Redbox Instant isn’t as comprehensive as Netflix’s, it offers physical rentals of DVDs (or Blu-rays for $1 more) at virtually the same monthly price as mere streaming from Netflix. To rent discs from Netflix, which means waiting for them in the mail, subscribers must pay $16 — twice the streaming-only price. Ironically, the competition in the streaming realm may be swayed by the value proposition of renting physical discs.

If I want to rent a disc, the closest and most-convenient option is the local Redbox kiosk. I don’t have to wait for the mailman or bemoan the loss of Saturday delivery. Just before I wrote this column, I passed by a couple of Redbox kiosks as I walked into the grocery store to deposit a check at the ATM.

It would be foolish to underestimate the reach of Redbox. Its customers rent 62 million-plus discs each month at 42,000-plus kiosks, according to the company. That represents a lot of customers, but it may not fully represent the amount of potential customers who walk by a kiosk while buying groceries or executing other transactions.

Redbox Instant may be a late comer in the digital entertainment race, but it has many physical marketing advantages — 42,000 to be exact. Redbox has a built-in audience to which it can market a value proposition that for those who like physical rentals is a better value than Netflix. But it also has 42,000 billboards to market its digital offering to consumers who have never rented a physical disc.

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