Hi there! Were you aware that those familiar Redbox DVD rental kiosks actually have a pretty fascinating origin story behind them? I was quite curious about the backstory behind the ubiquitous red vending machines, so I thoroughly researched the history of how Redbox came to prominence. Let me walk you through it!
The year was 2002 and DVDs had just begun their meteoric takeover as the dominant form of home entertainment. And McDonald‘s Corporation cooked up an intriguing idea to cash in on the craze. They launched an initiative dubbed "Tick Tock Easy Shop," installing convenience store-style kiosks selling everyday household items within their restaurants across the country.
McDonald‘s envisioned these Tick Tock Easy Shops as a way to provide customers added convenience – picking up a gallon of milk or travel toothbrush as easily as a Big Mac. However, by 2003 the project was essentially dead on arrival, fizzling out in short order.
But McDonald‘s exec Gregg Kaplan saw hidden potential in those now unused Tick Tock kiosks collecting dust. With the DVD explosion only accelerating, he envisioned transforming the failed kiosks into self-automated DVD rental stations for customers.
It was a light bulb moment capitalizing on two booming consumer markets – McDonald‘s expansive real estate footprint and America‘s insatiable appetite for DVDs during the format‘s heyday. McDonald‘s tested Kaplan‘s concept beginning in 2004 at Denver locations, rebranding the refashioned kiosks as "Redboxes" due to their vibrant red facade.
And just like that – a star was born! Customers enthusiastically embraced the novel Redbox experience. Unlike the traditional video rental stores of the time, Redbox offered incredible convenience, allowing DVD returns to ANY kiosk location across the country. No more late fees either!
With Redbox proving a bonafide hit out the gate, McDonald‘s raced to install Redbox kiosks nationwide over the next two years. And the timing couldn‘t have been better. At the same moment Redbox began its exponential growth, legacy rental chains like Blockbuster and Hollywood Video began shuttering locations en masse, unable to keep pace with shifting consumer expectations.
In fact, Redbox surged past Blockbuster in total United States locations in just 2007 – a mere three years after launch! And the rental figures were astounding too, with Redbox hitting the 100 million rentals mark by early 2008. Then just 30 months later, Redbox crossed an once unthinkable threshold: 1 billion rentals.
Thanks to $1 per night pricing and unparalleled convenience returning rentals anywhere, Americans had fully embraced the disruptive Redboxes mushrooming outside grocery stores and fast food chains nationwide. At Redbox‘s crest around 2013, an incredible 50% of ALL disc rentals in the country flowed through their iconic kiosks.
But back in 2005 amidst promising early results, Redbox caught the eye of Coinstar, operator of those coin counting kiosks ubiquitous in grocery chains globally. Sensing a game-changing opportunity, Coinstar purchased a 47% stake in Redbox for $32 million in 2005.
Over the subsequent four years, they boosted their ownership share piece by piece until completing a $170 million acquisition of the entire Redbox business in 2009. By this point, Blockbuster had shuttered over 1,000 locations while Redbox‘s empire ballooned towards 35,000 automated rental kiosks nationwide under Coinstar‘s stewardship.
But Coinstar‘s timing proved equally fortuitous from another perspective. As millions of Americans fell in love with Redbox‘s unrivaled convenience during the Great Recession, the company perfectly filled the affordable entertainment void left by more expensive rental stores faltering amidst economic turmoil.
Redbox‘s new parent company Coinstar helped scale operations exponentially just as market conditions boosted demand. Consumers turned to Redbox for budget-friendly diversion from troubling headlines, with rentals reaching nearly 773 million at the 2013 peak!
But reaching such mammoth heights also attraction unsavory attention. Major movie studios like Fox, Warner Brothers, and Universal publicly bristled at Redbox‘s stratospheric rise. They blamed those $1 rentals for destroying the higher profit-margin DVD sales crucial to their business model.
So all three studios eventually maneuvered to choke the Redbox pipeline by delaying new releases to their kiosks by 28 long days. It was a crucial tactical advantage for storefront chains like Blockbuster, attempting to turn the tide back in their favor.
But Redbox management proved equally shrewd tacticians. They simply pivoted to purchasing massive quantities of new releases at retail stores like Walmart or Best Buy during those early release windows. Ironically, the bulk retail discounts Redbox received actually SAVED them significant sums over normal wholesale rates!
This ingenious work-around let Redbox endure the studio delays while continuing serving customers the latest hits. Eventually, the studios waved the white flag. Fox, Warner Bros., and Universal all struck supplier agreements granting Redbox access to new releases after just 7-28 days on shelves.
But it turned out Redbox had already reached its high water mark – that aforementioned record 2013 tally. With streaming services like Netflix beginning to take hold in American living rooms post-2010, Redbox rentals have slid downhill every subsequent year.
In a bid to stop the bleeding, management took the strategic gamble to launch their own streaming Video On Demand platform in 2017 dubbed Redbox On Demand. And early results appear promising – Redbox disclosed the streaming service already accounts for 15% of total company revenue as of June 2022.
And that‘s not their only forward-thinking bet. Recognizing fading interest in physical media by 2019, Redbox diversified by entering film and television production under the new Redbox Entertainment division. The risky strategic pivot aimed to tap into burgeoning consumer demand for exclusive original streaming content.
Early returns are most definitely encouraging. Redbox produced films like Becky (2020) starring Kevin James have drawn solid reviews and viewership figures. But only time will tell if RedboxOriginals can scale sufficiently to lift up the declining core kiosk rental business.
That core business had fallen on exceedingly hard times by 2022 though, burdened by five consecutive years of steep financial declines as streaming solidified its stranglehold. So much so that Chicken Soup for the Soul Entertainment rode to the rescue in May 2022 like white knight, acquiring the heavily distressed Redbox in a $375 million deal.
And CSS Entertainment seems the ideal steward to nurse Redbox back to health. Over the past decade, they‘ve aggressively invested to transform the famous book brand into a leading production powerhouse. Their recent acquisitions like Crackle demonstrate CSS shares Redbox‘s vision to chase the exploding consumer thirst for digital original entertainment.
Only time will tell if the two companies can align their strategic visions and reinvigorate Redbox‘s next chapter. But notwithstanding the turbulent streaming era presently roiling the entire home entertainment industry, Redbox has demonstrated truly remarkable resilience over a two decade run.
Given Redbox‘s celebrated history of thriving amidst adversity, don‘t bet against a sequel with a happy ending! From rising Phoenix-like from McDonald‘s failed Tick Tock initiative to besting cinema titans Fox and Warner Bros., Redbox has overcome towering odds already. And with nimble new ownership, they just may orchestrate an equally improbable comeback story for the ages!
I don‘t know about you, but unearthing the rich history behind the Redbox phenomenon totally enthralled me over the past few days! Let me know if you have any other questions about the remarkable origin story of America‘s iconic Redbox kiosks.
