Thursday, February 17, 2011

Online Movie Subscription Business Getting More Crowded

Watch out HBO and Showtime, stay on your toes Netflix and Hulu, be mindful Apple and Amazon, and be concerned cable operators, another movie on demand service wants to enter the field. Redbox, who has been offering a dollar a day DVD rentals through vending machines, is looking to add a subscription service. "The online service would be combined in some way with physical DVD rentals, they said. Coinstar said in July it was developing an Internet strategy, without specifying the model. In October, Redbox said it planned a partnership with an existing digital player." Unlike Netflix who already had a DVD subscription model, Redbox's appeal was a one off strategy where customers only paid for the time they spent with the DVD. Their challenge will be turning these types of customers into a sustainable monthly package.

Their entry into the movie digital distribution field only creates more competition for the other players. Cable has the edge offering transactional, premium, as well as free on demand content for a low price. But that amount rises the more premium subscription and films are purchased. And cable customers get the sticker shock when their total bill, which also includes phone, cable, and broadband service rises above levels that customers want to pay. The Redbox traditional model of buying only what you watch at a low daily cost appeals to the budget conscious customer. The others, with their subscription packages, are appealing as their rates aren't combined with other services and so the customer is more comfortable spending $10 a month verse $200.

Having Redbox enter should ultimately help the customer. Competition in a free economy pushes pricing down. The low price verse high service models allow customers to choose which provider best serves their needs. Can Redbox adapt its model and grow its business? Clearly in a digital age, physical copies of content are becoming less necessary. It seems an inevitable move in order to remain competitive.