Outside of your Walmart or Walgreens — or 40,000 other U.S. retail locations — there’s a Redbox kiosk where you can rent a new-release movie on DVD, Blu-ray or 4K for a few dollars a night.
Will those Redbox consumers make the leap to streaming?
“Our consumers are value-conscious,” Redbox CEO Galen Smith said in an interview with Decider this week. “They’re typically later adopters of technology who may not have made the full switch to digital, which is what makes our transition to digital so interesting. We’re creating a one-stop shop for transactional video on demand, ad-supported content on demand, and more than 120 free, live TV channels.”
Redbox launched its streaming app in December 2020, and it’s available on nearly every TV and mobile platform. (It’s not yet on Amazon Fire TV; Redbox is working on it.) Redbox’s streamer is built right into the phone app you may already be using to reserve your DVD rentals.
This week, on the occasion of Redbox becoming a publicly traded company on the NASDAQ exchange, Smith spoke with Decider to talk about the company’s streaming ambitions.
DECIDER: The streaming service is about a year old. What’s new?
GALEN SMITH: One thing we’ll build in the coming months is a channels platform. Instead of building a Redbox subscription service, we’ll offer other subscription services to help match our 40 million consumers with digital streaming services that may not have a way to directly reach that consumer today.
So I could pay X dollars and get Curiosity Stream or Magnolias Selects right on the Redbox app.
That’s right. We’re building out those partnerships right now and are planning to launch the product in the second quarter of 2022 with a number of launch partners. We’ll have a simple experience with the billing and the sign-on in one place.
The big AVOD services I see out there are Pluto TV, IMDb TV, Tubi and Crackle. Does your research indicate that your kiosk consumers or your target consumers have high awareness of those services?
They’re not yet aware of all of those services, so that’s a big, untapped market for us. Redbox has been established in the industry for almost 20 years, and we’ve got a loyalty program with 39 million members. Last week we offered 500 points to stream on the app for 30 minutes, and no one else has the ability to do that.
Those services you mentioned are great for ad-supported content, but you have to go to another app to rent or buy movies. We’re offering all of that in one place and bringing simplicity to the consumer experience.
I’m surprised HBO Max and Peacock have not integrated movie rentals and purchases the way Disney+ has done with Premier Access. Do you see the library-building functionality of Redbox as an opening for you?
I do. Having all of your content in one place is a much better consumer experience. We think we can reach new customers and provide them an improved experience by doing all of that in one app. If you buy a digital movie, it will be right there on the Redbox app along with the subscription services and the free content. And purchase you make on other platforms will be available to watch on your Apple devices.
It’s hard to say when specific titles will be on the services, but we’re looking to get the best titles we can. Lionsgate has been a fantastic partner and is an investor in the business.
Are there other studios or content owners who are investors in Redbox?
Our investors include Lionsgate, Legendary Entertainment, Screenvision Media — which is one of our ad sales partners — and Basil Iwanyk who produces the John Wick movies. We’ve created a label with Iwanyk called Asbury Park that will produce 12 original action movies for us. The first one will deliver by the end of the year, and we’ll release that in 2022.
So those movies will be exclusively for rental in the kiosks and on the Redbox service?
We want to maximize the value of the title and be friendly to talent, so those movies will be available across Amazon and iTunes and other services and on the Redbox kiosks. We’ll sell the subscription rights, or Pay 1 rights, to a streaming service and eventually have them back into our ad-supported business.
Do you think you need exclusive titles or original titles on the Redbox service?
We think there’s an opportunity to bring originals and exclusives to the service. It’s been great for us to license movies and bring them to our consumers, and the opportunity to have those in an ecosystem that we control the distribution rights going forward creates an opportunity to figure out how to maximize the value of that.
One thing we would be able to do is have exclusives and originals on Redbox-branded free channels. We’re adding free channels on the Redbox service that we’ll syndicate to Roku Channels or VIZIO TV, and that gives us some incremental value.
The major studios have their Pay 1 and Pay 2 deals locked up for the foreseeable future. Will that make it difficult for you to acquire newer titles for Redbox app in the near term?
The Pay 1 window is an incredibly expensive business, so we’re looking at later content for the ad-supported tier of the service. Part of what we want to do is feed the service with our own titles. We know what our customers love, and we want to acquire or make those movies and have them available on the ad-supported side after some period of time.
Redbox is on all of the major TV platforms except Amazon Prime Video, which took its time getting to carriage agreements with HBO Max and Peacock. You think you’ll get an agreement soon?
We’re continuing to expand our platforms and just added Sony Playstation 5 a few weeks ago. We would love to be on Fire TV and think we bring a differentiated consumer to Amazon that may not already have an Amazon account. We think we could have a very interesting long-term relationship with Amazon.
The Redbox app is on Apple TV, iPhone and iPad, but you can’t rent or buy movies on Apple devices like you can on the other platforms. Are you moving toward a new agreement with Apple?
This is an issue with — for lack of a better term — the Apple tax that everyone has to pay. You can still purchase on other devices and watch on our app on Apple devices, but it would be very expensive to offer transactional content on Apple devices.
Depending on where litigation goes or whether Congress steps in, there may be a better solution longer-term. It’s not something we experience with Google and the Google Play store.
If Amazon spins off Epix after it completes its acquisition of MGM, would Epix be a good acquisition fit to get you into the premium subscription business?
I can’t speculate or talk about potential mergers and acquisitions. We’ll continue to look at opportunities to grow our business, and our ability to link our 40 million customers to various businesses may give us some of those opportunities.
Let me ask that in a way you can answer: Is one of the reasons you’re going public to give you a better mechanism to acquire other companies?
So, yes. [Laughs.] Having a new currency in our stock gives us an opportunity for potential acquisitions.
Where do you see opportunities that make sense for you — distribution like other AVOD channels, content like smaller catalogs, or technology that would help you with streaming?
You nailed it. Those are the categories. We’ll look for strategic fits for distribution. Acquiring a library could be interesting. We could possibly fast-forward our technology by doing something on the tech or ad-tech side.
My experience with ads on the Redbox app has been very good, and I’m seeing relevant, local ads. Can you tell me on a very layman’s level how that works? Are you staffing up ad sales or relying on established partners?
We’ve taken a diversified approach of having both programmatic and direct sales. We have a combination of local and national advertisers. We’ve made a lot of progress in ad-tech, but we think there is a huge opportunity to make that better. We’ve got a number of people on our team in ad sales, and we have a partnership with Screenvision for direct ad sales. I think we’re just scratching the surface on the ad side.
You have a coupon deal with Roku. Can you tell me about that partnership in terms of your customer acquisition cost?
On the box when you buy a Roku device, there’s branding for Redbox and a $5 Redbox coupon inside. That’s an efficient and inexpensive way for us to acquire customers on Roku’s platform. Our cost of acquisition is about $3 where others are spending $100 or more in some cases.
We have some key tools in our arsenal for acquiring new streaming. We’ve got the Redbox loyalty program and can provide points for ad-supported viewing or subscribing to one of the streaming channels, and we can bundle free movies at the kiosk for those things.
What impact did the pandemic have on your per-kiosk sales? People had more free time at home to watch movies, but you also had fewer theatrical films going into the rental window.
It was really interesting. In 2019 we had 140 theatrical titles, and they averaged 1.8 million rentals per title. In 2020 we had 68 theatrical titles, and the average went up to 2.2 million per title. We’ve got 26 new titles in the current quarter, and we’re expecting about 140 new releases in 2022.
So far, all of the major studios are sticking with a transactional releases even for movies like Halloween Kills and Dune that go straight to streaming. Do you think those windows will still be around a few years from now?
Windowing helps studios to maximize the value of a title they’re spending — in some cases — hundreds of millions of dollars to make and promote. Some of those windows may get shorter; you may have a shorter theatrical window before the transactional window, but transactional is an important source of revenue for the studios. I don’t see that changing anytime soon.