Redbox’s Strategy in the Movie Rental Industry

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A Case Study on

RedBox’s Strategy in the Movie Rental Industry

Submitted to the Faculty of the

Management and Organization Department

Ramon V. del Rosario College of Business

De La Salle University

In Partial Fulfillment of the Requirements

For the course STRATMA

 Cabrera, Kara Alyssa

Capiral, Marian Grace

Chan, Al Christine

De Guzman, Marius Anthony

Villena, Jose Pocholo

M74

May 21, 2015

1. Company Background

RedBox is a self-service DVD rental business containing new release movie DVDs  through 22,400 vending machine kiosk located in high-traffic shopping locations of United States, Puerto Rico and United Kingdom.  It was owned and operated by Coinstar Inc., which is a leading provider of money transfer services. Its services include converting coins to cash, a gift-card or e-certificates. RedBox began its operations in 2004 provided by the funding of McDonald’s Ventures. With that, initial vending machines of RedBox are located in a number of McDonald’s fast food restaurants.

1. Vision

To be the leading provider of movie rentals in United States, Puerto Rico and United Kingdom. Also, to continuously sustain the DVD rental business in the long run.

1. Mission

To delight and engage our customers through providing easy access to DVDs through our convenient kiosk rental system, while building solid relationships with our partner retailers and partner movie studios.

1. Core Values

• Embrace diversity, professionalism and growth.
• Be open for changes and continuous improvement with passion and creativity.
• Build positive relationships.

V. Problem

        Redbox’s idea is to entice people to rent movies and watch at their own convenience charging customers at a very inexpensive rate of $1. Now, Redbox is facing a problem on how to address the high cost it incurs from acquisition of the DVD titles through alternative procurement sources and the decrease in salvage value of the DVD titles?

1. Objectives

        In line with the problem related to product acquisition, RedBox’s objectives should be to:

        Financial Objectives:

• To decrease acquisition costs of DVD titles by at least 50% at the end of one year.
• To increase profit by at least 30% at the end of one year.

        Strategic Objective:

• To acquire long term (at least 3 years) contracts with movie studio partners at the end of one year. Moreover, negotiate that contracts should not have a provision for destroying of discs after end of useful life.

1. Alternatives

• Alternative 1: Develop network of other movie studios or DVD wholesalers to partner with (Ex. Netflix)

        This alternative will enable RedBox to build strong partnerships with other movie studios or DVD wholesalers, being able to ensure that the contract will be beneficial to both parties (No provision for the destruction of discs after the end of useful life). Prices of the DVD titles can be negotiated, and the digitization of these titles can also be included. Through this, costs incurred by RedBox can be decreased, and strong relationships between these studios or wholesalers can prevent early termination of contracts.