The Red Menace

You've probably seen them outside the supermarket. You know - those big red vending machines. But instead of a soda for $1.25, you get a movie. For $1. Swipe your credit/debit card, and the disc is all yours for the night. That's Redbox, and the machines are popping up everywhere, ready to supply the masses with low-commitment, impulse-rental DVDs. With 20,000 machines, each holding about 500 discs, Redbox is making tons of money. And some Hollywood studios are going ballistic.

DVD sales are falling faster than Congress's approval ratings. Is it because of Redbox, unkindly referred to as "The Red Menace" by its detractors? Some Hollywood studios think so. Clearly, the comprehensive reason is more complex (the poor economy, file sharing, Netflix, streaming, etc.), but that hasn't stopped some studios from declaring war on Redbox, throwing their phalanxes of attorneys up against Redbox's own phalanxes in an all-out effort to prevent DVDs from suffering a CD-like Armageddon.

Some Hollywood studios argue that renting movies for a buck inherently devalues the movie experience and movies themselves. That viewpoint takes a moral/artistic high road, and it also neatly agrees with Hollywood's profit motive. (Unlike Blockbuster stores, Redbox doesn't give studios a piece of the rental revenue.) Some studios argue that Redbox will destroy the movie industry. If everyone started watching movies for a buck, would you pony up hundreds of millions of dollars to finance a new film? Meanwhile, Redbox argues that it's adding revenue to the movie industry and should be treated like any other movie-rental company.

In any case, 20th Century Fox, Warner Bros., and Universal have tried to block Redbox's access to new movies by refusing to sell discs to Redbox through their normal distributors until several weeks after the street date. In response, Redbox sued Fox, Warner, and Universal on antitrust grounds. As a workaround, it has had to purchase those studios' DVDs from retail stores. (Other studios including Paramount, Disney, and Sony have cut friendly deals with Redbox.) Perhaps in response to that, according to another Redbox filing, the studios have instructed retailers like Walmart, Best Buy, and Target to restrict the number of DVDs they sell to Redbox personnel to as few as three copies. Both sides deny that, but Walmart and Best Buy admit that they generally limit the number of discs sold, to preserve availability for other customers. A check of Redbox's Web site shows that it has the all-important newest films from Paramount, Disney, and Sony, but the Fox, Warner, and Universal films are somewhat older.

As if it wasn't already complex enough, the Redbox plot is still thickening. Copying Redbox's success, machine maker NCR has licensed the Blockbuster name and is rapidly installing Blockbuster Express DVD vending machines. They store up to 950 discs renting for $1, and some even provide fast movie downloads to SD memory cards. In true vending machine fashion, this might become another battle of Coke vs. Pepsi.

Of course, Redbox isn't complacent either. Once thousands of disc vending machines are strategically placed, they're ready to vend anything that's round and shiny. The rumor is that Redbox is now talking to videogame makers about $2 videogame rentals.

Oh, boy. If Redbox is as aggressive with games as it's been with movies, Hollywood studios won't be the only companies seeing red.

Ken C. Pohlmann is well known as an audio educator, consultant, and author. He is professor emeritus at the University of Miami in Coral Gables and the author of numerous articles and books. Buying two of his tomes - Principles of Digital Audio and Master Handbook of Acoustics - would help push his bank account from red to green