With more subscribers than ever flocking to its DVD-by-mail service, Netflix Inc. is one of the few companies to prosper during the worst U.S. recession in 70 years. Yet Netflix CEO Reed Hastings still has something to worry about: an even cheaper DVD rental service run by one of his former lieutenants.
Once just an incongruous experiment amid the burgers and fries at McDonald's restaurants, Redbox has emerged as the largest operator of DVD-rental kiosks, with more than 15,400 vending machines set up to dispense $1-per-day discs in supermarkets and discount stores.
With Redbox opening an average of one kiosk per hour to lure budget-conscious consumers, Hastings is concerned that this upstart might upstage Netflix, whose cheapest mail-order plan costs $5 for two movie rentals in a month.
"By the end of the year, kiosks will likely be our No. 1 competitor," Hastings said in a recent conference call. "There are already more kiosks in America than video stores."
For first-run movies we haven't seen, we're turning more and more to Redbox. Can't beat a buck a movie and, sometimes, free. The downside? Limited selection and sometimes long lines as people browse titles and try to figure out the touch screen.
I'm hearing more and more people abandoning their Netflix queue and opting for Redbox. It'll be interesting to see how the market plays out.
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