Redbox started testing video game rentals in Austin, TX, Wilmington, NC, and Reno, NV, this week. With a mix of Xbox, Wii, and PS3 titles renting for $2 per night, the test indicates Redbox’s interest in expanding from DVD’s into other forms of entertainment.
Industry analyst Eric Wold claims that to be successful, Redbox would need to make more revenue off the games than it would have off the replaced DVD’s. Here’s where I disagree. If the game rentals are successful, Redbox could easily install a second (or, in some cases, a third or fourth) vending machine, so the video game rentals become an addition to, not a competition with, DVD rentals. Furthermore, the DVD business is yielding rapidly to on-demand services, which will force Redbox to a new business model whether it wants one or not; and video games are a natural extension since they can be distributed with the company’s existing kiosk hardware.
As to how the market will pan out, I can only expect it will do well in the short-run. I, and probably most other gamers, would happily pay $4 to play a game for a couple solid days to decide if it’s worth the $60 retail price tag. The real question will be whether Redbox can get the hottest titles at release, or whether it will be forced into a 4-week delay.
In the long-run, video games will continue their migration to DLC and on-demand. Video game publishers can undermine much of Redbox’s appeal by offering longer demos before relase, and that without resorting to EA-style game gimping. I doubt Redbox will find a viable long-term future in overnight video game rentals, but I believe they can make a ton of money in the short-term with it. Now if only Netflix would get into the fray so I never had to leave my home…
[...] Redbox has been testing video game rentals in limited markets for the past several months, it appears that they’re now going mainstream with the service. Available for $2 per day, you [...]
[...] Redbox has been testing video game rentals in limited markets for the past several months, it appears that they’re now going mainstream with the service. Available for $2 per day, you [...]
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