Red-box strategy in the movie rental industry

MGT 602

Strategic Business Management

Case Study
Red-Box Strategy in the Movie Rental Industry

Written by
Ahmad Alkharoubi
Ali Alzghoul
Elmer Serrao

November 28th, 2011

Company’s Overview

The focus of the case is on Redbox’s strategy and operations in the U.S. movie rental Industry. Redbox Automated Retail, LLC, it’s a wholly owned and operated subsidiary of Coinstar, Inc, which in addition to Redbox Movie Rental business, was also a leading provider of money transfer services and, most important, self-service coin-counting kiosks where people could convert coins to cash, a gift card, or e-certificates among other options, factor that turned out to be decisive for the success the company has been experimenting.
It started operations in 2004 with funding provided by McDonald’s Ventures, a subsidiary of McDonalds Corp. The great advantage McDonalds took from this equity joint venture was that, in addition to the opportunity of profitable business, this alliance represented a brilliant way to bring customers back to its restaurants more often, and thus expand its customer base and strengthen the loyalty of them to McDonald’s restaurants.
Nevertheless, ending a process of (partial) acquisition started in 2005, Coinstar, exercising its right of option, acquires the total (100%) ownership of Redbox Automated Retail from McDonalds for an amount of approximately 162.4 million, February 2009. Redbox strategy The structural idea that underlies the company's vision was that people could be easily enticed to rent movies at a place where they shopped regularly rather than making a special trip to a local movie rental store, especially if the rental fee was dirt cheap. In planning and implementing its strategy, Redbox designed a rental process fast, efficient and totally automated rental process, with no membership fee. Customers can rent or buy these DVDs at the kiosks in a matter of few minutes. In addition, DVDs are also for sale