A lot of giant red boxes have been popping up lately in grocery stores, gas stations and convenience stores across Canada. They’ve arrived at Tim Hortons and Shoppers Drug Mart too.
They’re the new face of DVD rentals, a business that continues to hang on even after the big box video stores faded to black.
Since 2012, the Redbox DVD rental business that has enjoyed huge success in the U.S., has been making inroads north of the border, particularly in major urban centres. The bright red kiosks are being installed at the exits of well-known shopping and snacking spots, filling the void left behind by the demise of DVD rental chains like Blockbuster and Rogers, says Ron Cihocki, country manager for Redbox in Canada.
The estimated $1 billion video rental industry in Canada has undergone a major shift with the emergence of online streaming companies like Netflix and iTunes plus video-on-demand offered by cable companies, and now through these bright red vending machines.
Canada is the third largest DVD rental country after the U.S. and Japan so it only makes sense to grow the business here, says Cihocki.
When the company first started in the U.S. 12 years ago, Blockbuster was going strong “with customers paying big dollars and huge late fees,” he says.
In contrast to the old-school video stores that took up thousands of square footage with row after row of movie titles, Redbox is essentially a fully-automated video rental store contained in 12-square feet of retail space.
There are 1,350 across Canada now, and every box has 200 of the newest movie titles available and 800 discs. The price point is also eye-catching at $1.50 per day for DVDs and $2 for Blu Rays.
Customers swipe a credit card to get a movie and then must return it to any location by 9 p.m. Movies can also be reserved online at redbox.ca, which also saves time by telling renters if their nearby box has the title they want at that time. Giving an email address is necessary to get a receipt but that step is optional.
“If you want to be lazy and rent them through the cable company, you pay through the nose,” notes Cihocki.
You won’t find indie, art-house and foreign films, old movies or episodes of popular sitcoms and dramas in this box. Those continue to be offered at independent neighbourhood shops (a dozen or so still exist in Toronto) along with video games, which are available at Redbox in the U.S. but not yet in Canada.
“We do not compete with the local video stores in the TV and DVD library categories. It is not our business,” says Cihocki.
“Redbox is unique in Canada. There may be a few small kiosk chains in regional parts of the country, such asVidèotron Superclub in Quebec with 60-plus kiosks, but we are the market leader nationally and certainly in the GTA with about 170 locations,” he explains.
There are also signs Redbox is making waves in the industry, with Ottawa-based Zip.ca announcing just last month that it was shutting down its video kiosk business after 10 years, and Best Buy no longer offering rentals from its kiosks.
“Canada’s rental transformation has begun,” says industry analyst Brahm Eiley at the Convergence Consulting Group.
His Toronto firm reports that out of the overall 2013 movie/TV rental market revenue in Canada, Video-on-Demand (Cable, Satellite, Telco TV) represented 31 per cent, stores 30 per cent, online subscription (Netflix) 26 per cent, kiosks 5 per cent, online transactions 5 per cent and mail 3 per cent.
This year Netflix is projected to jump by one per cent while the kiosk business will grow another 3 per cent, says the company report.
“We project that Netflix and Redbox will represent approximately half of 2016 Canadian rental revenue,” says Eiley, noting the majority will continue to be through the online subscription service.
The Oakbrook, Ill., company that first launched in 2002 at a McDonalds now has 45,000 members and 35,900 locations across the U.S., and more than 68 per cent of the population lives within a five-minute drive of a Redbox kiosk.
Boxes can be found at popular national landmarks from the Empire State Building in New York City to the Willis Tower in Chicago.
“They’re everywhere. In the U.S., Redbox is now a part of American culture,” says Cihocki, a native of B.C., where he opened the first Canadian kiosk in Langley two years ago.
In Canada they have so far signed major deals with Loblaws, Zehrs, Sobeys, Safeway, Shoppers Drug Mart, Tim Hortons, Petro Canada stations, Macs and 7 Eleven.
“When Redbox started in the U.S., the video store was king and Netflix was not even online yet. Today in Canada, the leading rental player is Netflix followed by cable TV Video-on-Demand,” says Eiley, who sees a similarly rapid market share trajectory for the company in Canada as it experienced in the U.S.