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Redbox Getting Physical

11 Feb, 2013 By: Stephanie Prange

Last week’s announcement that the United States Postal Service would cease Saturday mail delivery signaled yet another shift in the video rental business. Physical rental is going to kiosk leader Redbox.

The physical rental industry has undergone numerous such shifts in its more than three decades. There have been format and pricing shifts, from rental-priced VHS to sellthrough-priced discs. There have also been distribution shifts, from independent retailers dotted around the country served by distribution middle men to major chains such as Movie Gallery, Hollywood Video and Blockbuster Video that went direct with their studio partners. Then came Netflix with its by-mail physical rental service, which turned out to be a video rental chain killer. Movie Gallery and Hollywood Video went out of business after an ill-conceived merger, and Blockbuster — the last physical rental store chain standing — after bankruptcy, an acquisition by Dish and recent store closure announcements, will total about 500 stores.

With last week’s postal announcement, Netflix, too, is getting less physical. Disc renters who want a title on the weekend better have it delivered by Friday, as weekend physical disc rentals largely have been ceded to Redbox.

Netflix execs aren’t exactly unhappy about the new development, as they will likely be mailing fewer discs per month at a lower cost. Besides, Netflix execs aren’t interested in physical rentals much anymore, as they focus on digital distribution models, such as their new “House of Cards” original series and distribution of TV shows licensed from other content producers.

No, by default, Redbox is getting physical. I expect to see longer lines at the Redbox kiosks in my neighborhood on the weekends, as the last Blockbuster store closed years ago. Perhaps those same customers will notice that Redbox, too, via its joint venture with Verizon is getting more digital.

But the physical rental business is going to Rebox for the forseeable future. The video rental store is all but gone, and by-mail rental is hampered by a shrinking postal service. Yes, Redbox is getting physical.

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