Watch out, little red envelope: The big red kiosk may have legs. Today's The Wall Street Journal reports that Sony, Disney, and Lions Gate have all struck up deals with Redbox to keep their DVDs moving through its kiosks and into consumer's homes. This news comes while Universal Studios Home Entertainment, NBC Universal's DVD arm, and Redbox are still in court debating whether Universal had the right to stop its distributors from selling Redbox discs after Redbox refused to limit the number of DVDs it held and destroy old DVDs rather than resell them.
The move by the three studios indicates that in this challenging economic climate (even for generally recession-resistant entertainment companies) indicates that studios are looking for revenue from wherever they can get it. DVD sales are down—almost 14% so far in 2009—and Redbox, with its $1 per night DVD rental kiosks is now in more than 17,000 locations nationwide. So the thinking for Sony and the others appears to be that it might as well sell DVDs to Redbox rather than, say, no one.
DVD sales have long been the most steady and reliable source of income for the now-wobbling studios, and though studios do make money on rentals, it isn't nearly as much as an actual sale. But for $1 a night, who can blame budget-conscious consumers for trying before they buy? According to Adams Media Research, sales by kiosk companies are expected to grow by about 30%, or nearly $125 million, to $415.3 million.
Studios have a right to be worried about the new red-hot DVD rental outlets, but as with iTunes, Kindle and other disruptive innovations, at least people are still paying to consume your content, even if they aren't paying you directly.