Redbox Follows Netflix Lead, Raises Rates By 20 Percent

Posted by · October 27, 2011 11:59 pm

After a third quarter that exceeded projections, Redbox has announced that it will follow the lead of its highly criticized nemesis and raise its prices as well. That’s right. After reporting $465.6 million in revenue in the third quarter alone, the Coinstar-owned company will decided that an extra 20 cents probably won’t send frequent customers back to Netflix.

Set to take effect next Monday, the new $1.20 daily DVD rental rate announcement has already shaken up the Redbox share price. After climbing almost 20 percent over the past three months—the same period of time during which Netflix has been experiencing extreme backlash—Redbox shares have taken a 10 percent dive. While causation can’t be proven, the fact that this dip occurred after Redbox used its earnings announcement to introduce the new rates is hard to ignore.

Taking a moment to editorialize, TechCrunch contributor Devin Coldewey was not shy about his position on the company’s move. “It’s just hard to think of a more wrongheaded and shortsighted decision for them to make,” Coldewey began. “Here they have a strong brand built on thrift and a major competitor being laid low by an untimely and confusing rate change.” He concludes by saying that keeping the rate at $1 is “essential” to the Redbox’s survival.

I’m afraid that I’m going to have to agree with him in this case. With Netflix at an all-time low—losing 800,000 subscribers last quarter—it seems that Redbox was sitting pretty right where it was. Apparently, a short-term bump in revenue is more appealing than establishing a long-term-minded, trustworthy brand image. An image that would have both retained current kiosk frequenters and attracted hundreds of thousands of disenfranchised consumers—800,000 to be exact.