Over the past seven years, Redbox has installed more than 40,000 DVD rental kiosks in locations such as grocery stores and convenience stores.
Promising low prices and convenience, the retailer offered a much-needed option with bigger rental chains like Blockbuster shutting down. However, during the last 12 months, Redbox has uninstalled more than 500 kiosks across the U.S.
Blame the revenue. While the decision may seem like an odd one after all its initial success, Redbox’s parent company, Outerwall, claims that the slowdown in revenue is to blame. In 2013, the company’s revenue rose only 3% compared to double-digit increases in years past. The revenue is expected to stay the same throughout the next year.
The cause of the drop-off in revenue? There are simply no new ideal locations for Redbox machines. The service has reached a saturation point, and analysts wonder how far the decline may go from here on out. There are several challenges that the company needs to overcome in order to stay competitive.
The pressure to succeed is on. Outerwall has had very little success outside of Redbox. The DVD rental boxes accounted for 86% of its revenue in 2013, with the rest coming from Coinstar machines in similar locations. In February, Mark Horak, a former home entertainment executive at Warner Bros, took the helm. He is focusing on renegotiating studio deals with more favorable terms. First up is the pending expiration of content deals with five out of six of its studio partners.
In addition, the company is looking to include more Blu-ray titles for rent, as well as see the successful launch of Redbox Instant, which offers on demand streaming titles for $5 to $6, and a combination rental and streaming package for $8 per month. This would put it in striking distance of Netflix, and offer more opportunities to connect with consumers, which may help with the struggling revenue issue.