These days, in order to keep business viable, companies have to be inventive.  They have to step outside the proverbial box of accepted business practices.  One company which has done this is Redbox.  Their business is built on lower operational costs and buying procedures which help keep the amount of expenditures down.  They then pass this savings on to their customers.  The Redbox rental kiosks rent low cost DVD’s to their customers through the use of these business practices. 

Even though Hollywood has made a valiant effort to stop the Redbox success story, the rental company has continued to offer low cost DVD rentals.  By the end of 2009, Redbox is expected to have 20,000 kiosks available for low cost DVD rentals to the movie watching consumers.  This practice has cut into Hollywood’s profits.

The traditional movie track to the public goes through the movie theaters first.  Next, the DVD’s are sold to retail and rental stores at the price of four dollars per movie and often rented out at that same price.  After a 30 day time span, the same DVD’s can be rented or viewed online for half that price.  Because Redbox doesn’t have the overhead cost of a physical building to rent and heat, they can offer the new DVD’s as soon as they are released at a lower price.  Their rentals are available for one dollar.  The kiosks have a selection of around 700 movies and the entire selection of DVD’s, new or old, are offered for the same low price.

Redbox has Hollywood studios panicked.  The lower Redbox prices cut into their lock on the DVD market prices.  To fight this new business scheme, Hollywood has decided they will not sell new releases to Redbox.  Redbox isn’t going down without a fight.

Redbox has sued the Hollywood studios for their refusal to sell new releases at the lower wholesale prices to Redbox.  Redbox has also taken a firm stance by purchasing the new releases from retail outlets as soon as they are available.  Even though Hollywood is trying to squeeze out Redbox, their efforts are in vain.  Redbox continues to serve the public with the availability of low cost DVD new release rentals.  Redbox has changed the rules as far as new release DVD rentals go.  They have re-invented the wheel so to speak and kept a good thing going for movie conosieurs. 

Source: Spend Matters, Spend Magizine