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Redbox Chief: ‘We Are an Engine for Industry Growth’

Redbox customers are converting to purchase at a rate nearly 10 percent higher than Netflix and Blockbuster customers.

In recent weeks, there’s been chatter attempting to explain the decline in DVD sales, linking this trend to a multitude of factors: consumer preferences, changing physical media, the economy and shrinking retail footprints. 

Some have even promoted the idea that popular movie rental services like Redbox cannibalize the market for DVD sales. Others suggest that big studios are clinging to unsustainable business models. (For background, see Flurry of Lawsuits Puts Redbox in Spotlight)

The truth is that services like Redbox help to grow overall interest in and purchase of DVD entertainment. 
Market research shows that Redbox’s impact on sell-through is negligible, while its impact on purchase is significant. The relationship between rentals and DVD sell-through remains complementary, not cannibalistic. A recent survey of active Redbox customers confirms that rentals often lead to DVD purchases in today’s “try before you buy” culture. 
According to customer research, a majority of Redbox renters report their typical DVD purchase is the result of having previously rented and enjoyed the title. And Redbox customers are converting to purchase at a rate nearly 10 percent higher than Netflix and Blockbuster customers. 
DreamWorks’ Jeffrey Katzenberg recently echoed this fact, reporting that Redbox displays a “sharply higher conversion rate from rental to purchase” than other rental companies. 
Our company is also bringing lapsed renters back to the DVD market, while encouraging active renters to rent even more.  A recent NPD survey of existing Redbox customers found that 20 percent of Redbox rentals reflect customers who were not renting DVDs before the introduction of Redbox, but have come back to the industry because of our low price points and added convenience. 
The survey also confirmed that 42 percent of Redbox’s active customer base is now renting more DVDs than before Redbox entered the industry. 
As an important customer of the studios, we, along with other rental services, also provide a significant revenue stream for their businesses. Simply put, our growth can lead to theirs. For example, Redbox currently estimates we will pay more than a combined $1 billion over the next five years to Sony, Lionsgate and Paramount to purchase and then rent new release DVDs to consumers.
It is hard to ignore the exploding popularity of Redbox among consumers. From just 12 kiosks in 2002, Redbox is now available at more than 15,000 locations nationwide and has rented more than 500 million DVDs. Thousands of new customers try Redbox every day. 
When it comes to the decline of DVD sales, commentators and observers can point their fingers toward different targets. Some blame decisions, others blame the economy, the changing media landscape, or new and innovative distribution channels like rental service companies. As research proves, Redbox (and other DVD rental kiosks)should clearly not be one of those targets. 
To the contrary, more Redbox locations leads to added convenience for consumers and serves as an engine of increased demand for DVDs for our studio partners. 
This new model can be a win-win-win for redbox, the movie studios and most importantly, for consumers.
To learn more about redbox’s campaign to save low cost DVDs visit: www.savelowcostdvds.com

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A veteran of the video and entertainment industry with more than 25 years experience, Mitch Lowe was named CEO of Redbox in 2005 and president in April 2009. Widely credited for the development of the $1 per night DVD rental, Lowe has played a central role in growing the Redbox network from 12 locations to more than 15,000 locations nationwide. Prior to joining Redbox, Lowe consulted for McDonald’s business development group, heading the company’s DVD vending machine team – the team that ultimately created the Redbox concept. Before that, he helped to found Netflix, where he served as vice president of business development. In 2002, Lowe helped to bring Netflix public.