Could Redbox Crowdsource Its Way Around Movie Studio Blockades?

from the connecting-with-fans dept

Last week, we wrote about the legal battle Redbox is facing with some of the movie studios. Redbox, of course, rents DVDs at a $1/rental from vending machines that it places all over the place. Some of the studios are upset that (a) they don't get a cut of each rental and (b) that Redbox also sells those DVDs. So they've been trying to force Redbox to sign agreements that would give them a royalty cut and which would put limitations on Redbox -- such as not renting out videos until well after the DVDs are released and also having the company destroy, rather than sell DVDs when they were done renting them. Of course, the labels don't have much of a legal claim here. Redbox has every right to buy DVDs and to then rent them (right of first sale and all that). But, what at least some of the studios have done is to demand that DVD wholesalers not sell to Redbox, which certainly seems like a typical restraint of trade situation. In at least one case, a studio has also told downstream retailers, like Walmart and Best Buy not to sell to Redbox either.

Now, you might think that Redbox could just send employees into those stores without saying where they're from, but those stores probably don't carry enough stock for Redbox to buy enough DVDs efficiently. But what if they did something different? In the comments to that post last week, our rather insightful community started suggesting ways that Redbox could get around the sales blocks from studios by crowdsourcing the acquisition of movies.

There were a few different suggestions on how this could work, but the basic idea, presented by commenter "McBeese" laid out the basics:
  • Consumers open online accounts with Redbox. The account contains a Paypal id for deposits.
  • Redbox publishes how many copies of each DVD that they want.
  • Joe Consumer buys the movie, watches it, and then logs in to the Redbox site and 'pledges' the DVD. Each pledge automatically reduces the amount of a particular DVD that redbox is seeking.
  • Joe consumer mails in the DVD with an associated pledge number. When the DVD is received, the agreed amount is deposited into Joe Consumer's account.
A little slower than buying in bulk, but unstoppable.
I'd argue that rather than paying the user for it, Redbox could just credit their account for a certain number of free rentals. Then, not only does Redbox get these movies, but it builds up an even more loyal userbase... with really no significant way for the studios to block this out. There are some things that are tricky about this -- including verifying that the purchased DVDs are what they say they are, and coming up with a way to accurately handle the inventory management, but it is creative, and it shows that as much as the studios want to think they can control this market, there's always going to be some way around their restrictions.

Filed Under: crowdsourcing, dvds, movies
Companies: redbox

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  1. icon
    Fred McTaker (profile), 28 Oct 2009 @ 12:01pm

    Re: Misses the opening week window

    Whether they miss any "opening" is more dependent on the speed of the crowdsourcing interaction in retail vs. studio release to other rental companies. The studios are talking about delaying the other contracted rental services from the initial DVD/BluRay release by about a month, so that gives Redbox up to a month ahead of their competition.

    I like the crowdsource submit idea, but I think depending on how well the vending machines are run, it could be done even more efficiently than Mike's mail-in idea above. They stock each machine in each area with demand for a given movie with disc-holder empties for that movie the night before release. The crowdsourced disc buyer goes to the box, retrieves the empties in the same way they might rent a video normally (except without any money or credit exchanged at that point). As long as the empty is returned with a valid disc inside within the next day or so, full credit is applied to their account. Some penalty could apply to delayed returns or empty returns, the same way a bad rental return would be punished.

    To create greater incentive for early/fast submissions, some pre-arranged decay rate can be applied to the credit amount, i.e. starting at 3xDVD-cost=Redbucks, and descending to 1.2xDVD-cost=Redbucks after the initial high-demand period is over. Cash reimbursement could be straight cost reimbursement or minimal percentage incentive, so that greater Redbox credit incentives would be more appealing to the customer. Better-than-matching cash reimbursement could be also be used just in the first-day release period, to give incentive to immediate retail-to-vending transactions, so the customer doesn't even feel compelled to watch the disc before submission just to "get their money's worth" from the transaction.

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