Can Redbox’s first-mover status in kiosk vending of home entertainment (22,200 units) be overcome?
Bay: Redbox has been very successful at DVD vending. They have developed well-designed and executed physical logistics systems to support the DVD rental model. We have great respect for them. However, it is not clear how that expertise translates to digital content. Digital content is not subject to the First Sale Doctrine, and its economics, rights and deployment/operations execution are very different from discs — with complex technology requirements and unique licensing agreements. DVDs are a simple standard that are easy to use and understood by consumers. There is still no replacement in the digital world for a DVD, including a range of technical and usability issues that must be overcome. Redbox machines are, for the most part, placed in low-tech, high-traffic locations, which will eventually also work well for digital. However, in the early adopter phase of digital vending, kiosks likely will do better in assisted selling environments within retailers. This is typical of the his
