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Redbox Adds Video Games to Join GameFly, Blockbuster: Is Netflix Next?

Video games have always been secondary to movies at any rental outfit—a small section secluded in a store's corner, next to the microwavable popcorn and Swedish Fish. When the store-based model waned, that trend continued online: Both Blockbuster and Netflix nixed video games from its by-mail services, focusing only on movies. But recently, the trend has started to change: Games are rapidly becoming the next frontier of non-bricks & mortar businesses.

This week, Coinstar subsidiary and kiosk powerhouse Redbox announced they will be offering video games right alongside movies. After testing the system for well over a year, the company, which rents DVDs to customers from vending machines for $1 per night, said it will begin rolling out games to many of its 24,000 kiosks across the U.S. Game rentals will cost just $2 per night.

In June 2009, Redbox hired a VP of video games, Mark Achler, who helped introduce the pilot program in several markets. The company is now expanding that part of its business, reflecting a growing trend in the rental industry. Video game subscription service GameFly has seen big success, and offers 7,000 titles for a monthly fee nearly double that of Netflix's. The company is currently gearing up for its IPO. Blockbuster too realized video games were a strong point of differentiation, and in August added them to their movie subscription plan offerings for no additional cost.

The question now becomes: Will Netflix follow suit? We've reached out to them and haven't yet heard back, but it seems unlikely. Video games still have a far different shelf life than movies—they take far longer to complete than your average 2 hour film. What's more, video games are very costly. To offer them by-mail, GameFly has had to amp up prices, and to keep subscriptions reasonable, Blockbuster only offers older titles or many with a three month delay. Even $2-a-night rentals is steep—a week working toward completing a video game is not uncommong, but will run you almost as much as a GameFly subscription.

Most importantly though, Netflix has been very clear: CEO Reed Hastings has said explicity that streaming is the next frontier. Given that video games very much are only a disc-based solution, it's very unlikely that we'll be adding N64's GoldenEye 007 to our queue alonside the James Bond DVD GoldenEye.

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