Redbox has a digital plan: If you can't beat 'em, join 'em. Looking at what Netflix is doing, Redbook strategists must have said: "Hey, let's not re-invent the wheel. This works."
Netflix does well because it gives media companies easy-to-realize value for each TV and movie it sells. And so Netflix went from a head-scratching, decidedly analog business to a digital one -- from mail-order rental DVDs to streaming video -- without missing a beat.
Redbox, the low-cost kiosk DVD retailer, hopes to transfer its $1 DVD rental model much the same way. But here's the rub: Internet rentals of new-release films typically now cost consumers between $4 and $6. The company hopes a monthly consumer plan -- like what Netflix has -- can effectively push down the price to around $1 a rental.
One word of advice: Don't upset the apple cart of those that control all that big content.
Netflix has found the right way: It pays up front and offers minimum guarantees to its entertainment content partners. Other digital video companies have tried an end-around. In the end, that approach will fail.
A bunch of new streaming video businesses are looking to do battle with the networks/studios even before launch. They want to take on these media companies because of what they feel is a seam in the copyright system as it pertains to video.
All that is a bad idea -- and down the road, bad for their brands. We have seen this movie before: Napster, and, in its early years, YouTube.
Look at where Fox and Cablevision are now. Does Netflix or Redbox want to be in this kind of position years from now? Who will consumers really be mad at? This is a kill-the-messenger scenario. Cable operators, unfortunately, mostly from their own doing, have a lot of baggage from years of consumer neglect.
As has been said before in this column, viewers aren't really interested in why a cable operator may have to pay an increased wholesale price for a particular network. And in the end, consumers will find a video retailer who can make the right deal -- a solid financial arrangement with a TV network or a movie studio.
Redbox has that idea right, as does Netflix. Entertainment branding is important -- even for retailers who are still relatively new at it.
