Today's Netflix Price Increases Could put Redbox More into the Black
OAKBROOK TERRACE, Ill. -- Today's Netflix price increases could present the ideal time for Redbox to convert customers to its movie and game rental kiosks.
Netflix is raising prices by as much as 60 percent for its almost 25 million U.S. subscribers. That price hike, which now will provide customers with $8- to $16-per month plans, could cause plenty of customers to cancel their Netflix accounts and search for another source for movie entertainment.
Blockbuster is another company that could benefit from Netflix's ascending prices. However, the company filed for bankruptcy protection last year. Even though the brand was rescued by Dish Network Corp. for $234 million, only 1,500 Blockbuster stores still exist. Therefore, Redbox is the only company who can take advantage of Netflix's changing price structure, Michael Pachter, analyst for Wedbush Securities, told the Associated Press. He added he believes between 2 to 3 million Netflix customers will cancel their accounts as a protest to higher prices.
Redbox, owned by Coinstar Inc. and appearing in many convenience stores, realizes it has an opportunity on its hands. "We are very cognizant of the value of the dollar," Gary Cohen, Redbox's senior vice president of marketing and experience told the AP. "Redbox is all about simplicity, convenience and value."
Cohen's "value of a dollar" assertion is backed up by the fact Redbox offers movies for $1 a night as its 33,000 U.S. rental kiosks. Blu-rays cost $1.50 a night. The company has tested slightly higher prices, ranging from $1.10 to $1.20 a night in Kansas City; Mo., Phoenix; Charlotte, N.C.; Portland Ore.; Pittsburgh and Austin, Texas. However, according to the AP, Redbox doesn't plan to raise its prices permanently.
If movie fans switch their allegiance to Redbox, they can not only rent movies. Redbox also provides something Netflix does not provide: video game rentals. Video games are available to rent at the rate of $2 per day.
One of the advantages Netflix still has compared to any competitor is convenience. Customers can receive and return movies for free via the U.S. Postal Service. However, the AP reported Redbox is closing the gap. Two-thirds of the nation now lives within a five-minute drive of a Redbox kiosk. In addition, Redbox customers who travel can take solace in the fact that once they rent a movie or video game, they can return it to any other Redbox location without penalty.
Despite a company some might determine is a staunch competitor to Netflix, Netflix CEO Redd Hastings has said he no longer views Redbox as the company's biggest threat. Instead, Internet streaming options that supplement pay-TV services, such as those offered by HBO and Comcast, are, Hastings told the AP.
Internet downloads are a service Netflix has championed, yet Redbox has yet to provide. However, Redbox, which reported earned its parent company $726 million for the first half of 2011, said it plans to offer Internet movie streaming by the end of this year.