— Redbox DVD rental kiosks, a seeming throwback to a
simpler technological time when videos were something
you held in your hand and late fees loomed over your
head, are mounting a comeback.
year, Redbox removed nearly 1,000 of its kiosks amid
slumping sales and increasing digital competition and
was looking like it might follow Blockbuster into the
graveyard of corporate obsolescence.
to 2017, and Redbox, based in suburban Chicago, is
adding 1,500 kiosks back into circulation, with new
ownership projecting a long-running future as the last
man standing in a declining video rental industry.
Smith, 41, the former CFO of previous owner Outerwall,
took the helm at Redbox in September after Apollo Global
Management bought the struggling company for about $1.6
billion. Smith, who started working with Redbox eight
years ago as an investment banker at Morgan Stanley, now
oversees an empire of 40,000 kiosks dotting storefronts
across the country.
in 2002 by hamburger giant McDonald’s as a vehicle to
drive traffic to its restaurants, Redbox installed its
first fully automated DVD rental kiosks in 2004.
Outerwall acquired Redbox in 2009.
sales have slid in recent years along with the rest of
the video rental industry. In 2016, physical video
rentals fell by nearly 18 percent year over year,
according to the Digital Entertainment Group.
announced in 2013 it was closing its company-owned
stores, while Netflix has reinvented itself as a booming
internet streaming TV network. Redbox failed with its
own digital initiative three years ago, but Smith is
banking on convenience, low prices and a dwindling but
die-hard market to keep its video rental business model
in the black.
following interview has been edited for length and
Who is the typical Redbox customer?
We skew a little bit more family because they want that
great new content at a great price. We have video games,
so we are able to attract the male or female video game
consumer. And we tend to, relative to other options,
skew a little bit lower on the socioeconomic scale.
Why would anyone drive to a store to rent a video when
they can click a button on a remote and never leave the
For lots of hard-working families across the country,
this is how they consume entertainment. They would
rather drive to a kiosk and save money, which they still
see as very convenient.
At $1.50 a night for DVDs, Redbox rentals are generally
cheaper than digital video on demand, but what’s the
value proposition for customers after you add in time,
gas and the energy expended just to watch a movie?
They care about saving that money. A five-minute drive
is not going to be that much gas or time. In 11 minutes,
you’ve got that movie at your house.
Last year, the company announced it was removing 1,000
kiosks. Now you’re putting in 1,500. What changed?
We see real opportunity to reach more consumers and
drive more top- and bottom-line (revenue) by installing
more kiosks. Our focus is really on driving
profitability and cash flow, and to do so, we want to
install more locations.
Is there something different about the locations you’re
choosing this year than the ones you removed last year?
We continue to see where consumers want to go shopping.
We continue to see real demand at Walmarts — also in
the drug(store) channel and the dollar (store) channel.
So we’re expanding in all of those.
How many titles are in a Redbox kiosk, and how much
business does a good kiosk do in a typical day?
Typically it’s 150 to 200 different titles that are in
a kiosk. Obviously, for newest releases, you’re going
to have multiple copies of each movie; we want to make
sure that we satisfy demand. An average kiosk in a year
will do $50,000, $60,000 in revenue.
Millennials have been leading the cord-cutting charge in
favor of streaming. Are they renting DVDs?
They are renting DVDs. Millennials see us as a great
access point to watching new release movies. They may
not be able to afford being able to spend $5.99, $6.99
or more for a (video on demand) rental, and instead they’re
able to access it through us. Contrary to what people
think, we actually skew a lot younger in terms of our
How big a part of the business are video game rentals?
Game rental is about 4 percent of the business today,
but we’re focused on really growing that business. We
see a real opportunity in allowing consumers to try a
game before they buy it. So we’re expanding that as we
Netflix transformed from a DVD by mail company into a
streaming TV network. What went wrong with Redbox
I think our consumers are transactional in nature. They
want to be able to buy a movie when they want to see a
movie. We continue to look for ways to serve those
needs. Today, we do it through our physical kiosks.
Do you see a new digital strategy in the offing for
We listen to our consumers, and we want to serve what
they want. So we continue to look at opportunities to be
able to serve it both physically and digitally. It could
be something down the road that we offer if it helps to
satisfy consumer demand.
Can consumers buy DVDs from your kiosks?
We actually are now offering the ability to buy video
games and movies, and because they’re used product,
they can actually buy it at a discount. We can have
movies that are as low as $3.99 up to $11.99.
Are all the movies available for sale?
No, they’re not all available for sale. We’re very
focused on curating really attractive movies that we
think consumers will want to purchase.
The glory days for video rental stores are long gone.
Why do you see a future in this model?
Consumers still want it. They like being able to have
the latest content. DVDs and Blu-rays are a great way to
access them through their players at home. So we
continue to serve that need. We provide the best value.
And we’re able to offer them video games and give them
an entertainment night at home. We continue to see a
very long curve for the business going forward.