You might think running 40,000 kiosks that rent physical DVDs, a legacy entertainment business surely on the order of AOL dialup, might drag on a modern media company’s bottom line.
But Redbox Entertainment CEO Galen Smith doesn’t see it that way, especially as his company layers free and transactional online-video services into the kiosks, which themselves have moved far beyond their vending-machine roots.
“It's expanded,” Smith said of the kiosks’ expanding role. “Sure it's absolutely something that allows you to distribute discs, or other content. But we really transformed over the past number of years to make it an advertising machine. Think about it as a digital out-of-home entertainment experience.”
Increasingly, Redbox is leveraging its long-time relationship with 40 million tech-reluctant customers to bolster that collection of ad-supported and transactional video services, drive original programming, and, soon, launch a single-sign-on program for SVOD partners.
“These, on average, are later adopters of technology,” Smith said. “So they haven't necessarily made that full digital shift yet. If you think about Redbox being an almost 20-year-old business, that becomes really, really powerful, because we're not necessarily competing for the same customers that everyone else is. We've got this unique defined customer base that loves us and is loyal to us. And what we want to do is continue to expand the way that we serve their needs.”
Offering more options, including buying or renting videos online, has actually led to more transactions at the kiosks too, Smith said. Importantly, it’s often the same customers.
“They actually not only started to use it digitally, but they increased their use of physical,” Smith said. “And so it's been a really powerful tool for us to lift all boats.”
That’s far from the company’s only recent initiative, however. The deals have arrived at a dizzying rate, including four new movie and game-show channels from the Game Show Network, and an expanded agreement with Anthem Sports & Entertainment to carry AXS TV Now and Fight Network. Another recent deal with Kevin Hart’s LOL Network added 100 hours of standup comedy.
The company also just hired Christina Chu, a veteran of NBCUniversal and WarnerMedia’s FullScreen digital unit, as VP of technology, and signed a slate production deal with Basil Iwanyk (John Wick, Sicario, The Town). That deal’s first feature, Black Site, is due early next year.
At the same time, Redbox is going public through a special-purpose acquisition corporation, or SPAC. The deal still leaves as majority shareholder Apollo Global Management, which has owned the company since 2017.
Redbox has been expanding its digital reach since Apollo bought in. The Redbox On Demand TVOD service arrived in 2017, and Redbox Originals made its first acquisition in 2019.
Its FAST service, Redbox Free Live TV, debuted early last year, and now has three branded linear channels, along with about 100 other channels from providers such as Cinedigm, Lionsgate, Jukin Media, Group Nine, and FilmRise.
Free Live TV compliments AVOD service Redbox Free On Demand, which launched shortly prior.
“If you think about the history of Redbox, it's really been a new-release movie distributor,” Smith said. “And a transactional video-on-demand business fits that very well. We didn't really know if there was going to be an opportunity to do this; you almost had to get permission from the consumer. But being able to give the consumer choice was incredibly powerful.”
Offering as many options as possible is a way to meet Redbox’s customer base wherever they are, Smith said.
“If you think about our consumer base, it's right on point,” Smith said. “They're okay watching ads, particularly if it gives them content for free.”
Of note, the company plans to plow some SPAC proceeds into building out the “channels” service, giving customers easy access to SVOD services on top of the free Redbox services.
“We don't think that today, the world needs a Redbox-branded (SVOD) offering,” said Smith. “But what we do think that we are uniquely positioned to do is offer the streaming options of others through a platform that makes it really, really easy.”
Using a single-sign-on, single-password offering, especially for a tech-reluctant customer base like Redbox’s, could be a big differentiator, Smith said. Ask Smith if there are too many SVOD services, and he gives a careful response.
“It's a tricky question,” he said. “I think that there are services that have brand awareness or IP that consumers know and love, and it makes for a really great direct experience. Yeah, they may not need our help. But with the proliferation of direct consumer services that have launched in the past 12 or 18 months, there's a whole other set that need our help to help grow their base. And I think we're really well positioned to be able to help them do that.”
Redbox has “this really big set of consumers that are later adopters of technology and haven't made that full digital shift,” Smith said. “And I can help bring them to you as a subscription service, it becomes a really incredible partnership, because they may not have been able to find you otherwise. And being able to use that kiosk to serve up a free trial when you're grabbing a movie becomes a really powerful tool.”
With 39 million accounts in the company’s loyalty program, it can reward points for customers who try out the TVOD program, or a subscription. The rewards might even include free kiosk credits.
“So the kiosk is always going to have more recent content than is available on a subscription service,” Smith said. “And so our ability to get the latest new releases that way, and to be able to give a streaming package bundled up together, so you actually get more value there than anywhere else, becomes a really powerful tool.”
Expect the Redbox channels venture to arrive Q2, next year. The SPAC likely will have wrapped by year’s end, regulatory and investor climate permitting. The deal will keep Apollo as majority owner, one of the few things not changing for Redbox, or for its consumers.
“One of the mistakes that a lot of folks make is they may have a certain preferred way which with which they consume entertainment,” Smith said. “And it may not be exactly what represents everyone. And so there's a lot of customers that are doing other things than what the whole world assumes is happening with digital consumption.”
Fold in the company’s expanding Originals venture, fortified by the data the company has collected about what stars, directors and genres its fans want. But in choosing which projects to back, the company also has ambitions to move beyond its backyard.
He points to a film Redbox bought last year, Shadow In the Cloud, a WWII-set supernatural thriller starring Chloe Grace Moretz, as an example.
“What we want to do is offer it everywhere,” Smith said. “So it was available not only on the Redbox On Demand TVOD service, but on iTunes and Amazon and everywhere else. And then we waited and brought it out on the kiosk and lowered the VOD price to a more traditional price point where you'd see that's not premium VOD. And then in May, it went on Hulu, because again, we want to partner with SVOD players, not necessarily compete with them.”
