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Interview: Redbox Ramps Up Game Rental Business

Interview: Redbox Ramps Up Game Rental Business

April 28, 2011 | By Chris Morris

There's nothing new about video rental chains mixing video games in with the latest Harry Potter film on their shelves. The practice has historically helped supplement dwindling income from film rentals as companies like Netflix shifted the paradigm.

But now, starting in June, Redbox is getting into the game rental business -- and it's a different story than before.

Blockbuster really blazed the trail for a national video game rental strategy, and it was pretty effective up until the company had its lunch eaten and became a mere shadow of its former self.

But unlike that former giant, Redbox has thrived amid Netflix's expansion. Its strategy of placing low-cost film-rental kiosks in non-traditional locations, including pharmacies, grocery stores, fast food restaurants and convenience stores has worked -- and worked well.

Now it's betting that video games will not only thrive similarly, but will boost its core business too, as the company places games in 21,000 of its kiosks.

"Second to movies, renting and playing games is a huge part of the entertainment pie in this country," says Mitch Lowe (pictured), president of Redbox in an interview with Gamasutra. "This is incremental. It's bringing a new member of the household to us. What's better is when people are adding games, they're also adding movies."

Game rentals will cost $2 per day, vs. the company's $1 per day rate for DVDs and $1.50 for Blu-rays. Games will be available for the Wii, Xbox 360 and PlayStation 3. While the company did experiment with handheld games during earlier market tests, it opted to ignore systems like the Nintendo DS and 3DS when it expanded the program.

"At this point in time, we're focusing on the [home console market] based on the overall installed base of those platforms and [their use of the] physical media that we're familiar with," says Joel Resnik, vice president of games for Redbox. "The handheld is in transition. … I feel like it's an upside opportunity down the road."

Titles will be available in kiosks the first week of launch, but not always on their street date. Like with movies, customers can grab games spontaneously from the kiosks, but users will also be able to reserve titles online to ensure it's available before they venture out.

The move into the gaming space is hardly an abrupt one for Redbox. The company has been testing video game rentals for almost two years. In that time, over 1 million people have taken advantage of the service -- an impressive number, given that just 5,000 of its kiosks offered the opportunity.

For publishers, the expansion of game rentals presents a chance to reach customers in locations they haven't previously penetrated.

"The publishers are looking for new ways to make revenue," says Resnik. "Adding games to the Redbox kiosks helps make discovery of their content easier in places they've never been before."

On average, kiosks will have 20 unique titles each in mid-June. Redbox hopes to expand that to 24 in the coming months. Resnik says the company expects to offer 80-100 unique titles per year.

As far as upcoming consoles -- and whether the company will support them at launch -- Redbox says it hasn't thought that far ahead, despite the planned arrival of Nintendo's Wii successor next year.

"To speculate that far out would be fairly difficult," says Resnik. "I hope to see more on [the so-called 'Wii 2'] at E3 and will formulate a plan of action from there. … At the end of the day, footsteps and dollar will determine what we do."

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