Redbox Instant Was Doomed from the Start

7 Oct, 2014 By: Thomas K. Arnold

There’s only one thing that surprised me about Redbox pulling the plug on its streaming video joint venture with Verizon Communications, Redbox Instant by Verizon: Why did it take so long?

Back when I attended the big press conference at the Consumer Electronics Show in Las Vegas in January 2012, announcing the JV (it didn’t actually launch until March 2013), I had trouble understanding the business model.

Generally, if you take aim at a competitor — in this case, Netflix — you build a better mousetrap, as they say. Apple entered the cell phone market with the iPhone; Sony jumped into the video game business with the PlayStation.

But from the very start, Redbox Instant appeared to be a poorly conceived venture that consistently failed to take advantage of Netflix’s chief weakness: a limited selection of content, particularly on the movie side, which despite its grand success remains a depository for studio castoffs.

Of course, if Netflix couldn’t strike a deal with Hollywood for better product, what would make anyone think Redbox could do it? But even if the two services had similar (weak) content offerings, why has Netflix exploded while Redbox, well, appears to have imploded?

One factor was that Netflix already had an established base of customers accustomed to the subscription model, through its hugely successful disc-by-mail rental service. All Netflix had to do was migrate those customers over to streaming by making the viewing experience even easier and simpler, which it was able to do by eliminating the hassle of having to send back a disc.

The other advantage Netflix had was in brand awareness. When Netflix launched its streaming service, it was already known for sending movies and other content directly to consumer homes, albeit in physical form. Redbox, on the other hand, was known for its vending machines, a model in which consumers had to go somewhere to get their entertainment.

Netflix also marketed the hell out of its streaming service, to the point where Netflix became as iconic a name in home entertainment as Blockbuster had once been. Redbox hooked up with a cell phone company known for smartphones and data plans, not movies.

Redbox’s unique selling proposition was this: Subscribers didn’t just get unlimited streaming of movies and TV shows, they also got four DVD rentals a month from Redbox’s network of kiosks.

Big whoop. If you’re trying to sell someone a new car, you don’t throw in free horse-and-buggy rides.

In the official notice on its website announcing the demise of Redbox Instant by Verizon, the company said, “The service is shutting down because it was not as successful as we hoped it would be.”

That, my friends, is an understatement — and, in retrospect, Redbox has only itself to blame.

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About the Author: Thomas K. Arnold