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Blockbuster should buy Redbox

Author: WireSpring on 2008-04-14 10:40:08

NewTeeVee's Chris Albrecht makes the case for bricks-and-mortar retailer BlockBuster buying upstart self-service poster child Redbox:

Redbox has 6,800 fully automated DVD rental kiosks across the country (more locations than Blockbuster) in stores like Walgreens, Wal-Mart and even McDonald’s (which is an owner, along with Coinstar). Instead of building and marketing another set-top box for the home, Blockbuster should adjust the Redbox kiosks to also digitally send movies to the set-top boxes people already have, like TiVo and Xbox.

Going out into the real world to download something may seem like an unnecessary step, but it’s actually more of a transitional one because it combines elements people are already familiar with.

First, people still go to video stores. In adding these kiosks to their real-world locations, Blockbuster would bridge the the familiar experience of browsing the aisles for a movie with the more unfamiliar one of digital delivery.

Second, by using existing set-top services like TiVo, people wouldn’t feel like they have to buy a new device, or worry about buying one that will die quickly (read: HD DVD).

Finally, by leveraging the existing Redbox kiosks in non-video locations like grocery stores, Blockbuster could take advantage of impulse renting. People are already used to the idea of DVDs being sold in supermarkets, this would nudge them a little further and into downloads.

Our take:

We know a few things for sure: first, Blockbuster is hurting, despite (or perhaps partially thanks to) their acquisition of their only major competitor in the retail space, Hollywood Video. Second, Redbox's growth and glowing reviews from retailers and customers alike show no signs of slowing down. Third, at some point in the future, it is likely that people will download some or most of their video from the web, bypassing physical media altogether. Blockbuster is playing a somewhat dangerous game by trying to jump from (A) to (C) with their new set-top box.  Despite hype, there is no sure sign that the majority of consumers are ready for a direct-to-tv download mechanism.  Many simply don't have the bandwidth to support such an operation in real-time, and even if they did, the lackluster growth of cable's video-on-demand channels indicates that this is not a sure home run. Grabbing Redbox's self-service kiosk network gives them a new top-of-mind presence for shoppers in thousands of retail locations nationwide, and of course it doesn't prevent them from moving to an all-digital platform in the future.

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