by Janko Roettgers

 Redbox

Redbox is getting ready to give online video another shot: The DVD rental service has plans to launch a new video streaming service called Redbox Digital, Variety learned from multiple sources familiar with the company’s plans as well as a series of leaks that included concept screenshots and the logo of the service. A closed beta test may be available soon, according to one of those sources.

A Redbox spokesperson sent Variety the following statement: “Redbox continually looks for ways to enhance our customer experience. For tens of millions of consumers, Redbox is their source for new release rentals without a subscription. As such, we regularly conduct tests of potential new offerings, that may or may not be brought to market, as part of our ongoing commitment to provide additional value.”

In many ways, the streaming service will be a déjà vu for Redbox customers: The DVD rental company had launched a streaming service dubbed Redbox Instant in a joint venture with Verizon in early 2013, only to shut it down some 18 months later.

But while Redbox Instant aimed to challenge Netflix with a subscription bundle, the company now seems to have more modest plans. Redbox Digital is being built as a video-on-demand store similar to iTunes, Vudu or Google Play. Consumers will be able to rent movies or TV show episodes for streaming, or purchase digital copies.

Design concepts of the service that have surfaced online show a tight integration with the existing Redbox service. Redbox users will find the digital content store as a tab on the Redbox website, next to existing tabs for movies and games, if the company follows through with the plans laid out in those images.

 

The service would also plug into Redbox’s existing loyalty program, allowing consumers to earn points with every digital rental or purchase. There are plans to integrate the service directly into Redbox’s mobile apps, and extend support to TV-connected platforms like Chromecast and Roku.

Redbox’s plans for a new digital storefront come at a critical time for the company. Redbox’s revenue was down 17 percent last quarter. Rentals declined to $587.6 million in 2015, down from a high of $772.9 million in 2013. For this year, parent company Outerwall expects another DVD rental decline of 15 to 20 percent.

Some of this may have to do with a lack of huge blockbuster movies, but a shift in consumption patterns from physical media to digital clearly also plays an increasing role — and has many believe that Redbox’s business may sooner or later evaporate.

However, Redbox’s past attempt at building a digital business was anything but successful. Redbox Instant tried to package Netflix-like subscription plans with physical disc rentals in a standalone product. The joint-venture also aimed to combine Redbox’s marketing muscle with Verizon’s technology chops. In the end, neither could measure up to Netflix, which offered consumers a much bigger catalog, and was starting to heavily invest into original content at a time when neither Redbox nor Verizon had the stomach to do so.

There is a case to be made that Redbox will be more successful this time around. By integrating tightly with its existing service, the company is essentially targeting millions of Redbox users who already use its website and apps to review and reserve their DVDs. Soon, those consumers may have a choice: Hold a movie for $1.50 at the local store, or start watching it right away without leaving the house for a few dollars more.

Still, the digital video market is a crowded one. A number of digital storefronts, including Target Ticket and Samsung’s video hub, have closed in recent years, despite backing from strong brands. Others were forced to consolidate in light of strong competition. Earlier this year, Fandango bought M-Go from DreamWorks Animation and Technicolor.

What’s left are a few big players with massive reach: Apple’s iTunes is tied deeply into iPhones and iPads, and Google’s Play Store is pre-installed on hundreds of millions of Android devices. One could argue that there’s a relatively small overlap between heavy users of either two stores and the typical Redbox customer — but that still doesn’t mean that Redbox Digital will add enough streaming revenue to turn things around for the company.

 

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