What Netflix effect? Redbox will raise rates instead
Redbox was expected to be one of the big beneficiaries of Netflix's most recent price change. But the effect of that change wasn't entirely apparent in Redbox's numbers, as parent Coinstar reported revenues Thursday just slightly above Wall Street consensus.
Context & Ripple Effects
The assumption since Netflix's July price hike was that churned subscribers would flow straight into $1-a-night kiosk discs, making Redbox the cheap alternative. Coinstar's Thursday report punctures that: revenues came in only slightly above Wall Street consensus, with no visible Netflix-driven bump in Redbox's numbers.
That leaves Redbox leaning on its own lever instead — a rate increase — a notable reversal for a company whose brand was built on undercutting everyone, and one that sits awkwardly with its earlier ambitions to take on Netflix in streaming and the 2009 study warning it would 'destroy the entertainment industry' on price alone.
First-order effects
- Redbox will raise its rental rates, trading its low-price positioning for margin even though the expected influx of Netflix defectors has not shown up in its results.
- Parent Coinstar's quarter lands just above consensus, meaning investors get neither a growth story nor a clear explanation for where the Netflix churn went.
Second-order effects
- A price increase with no competing windfall tests how inelastic kiosk demand really is — if volume holds, rivals like NCR's Blockbuster Express kiosks gain cover to raise their own rates; if it cracks, Redbox hands back share at exactly the moment it expected to take it.
- Netflix's price-hike fallout now looks contained within its own subscriber base rather than spilling into adjacent rental formats, weakening the substitution thesis that underpinned both companies' strategies.
Third-order effects
- If disc rentals and streaming subscriptions keep behaving as separate markets rather than substitutes, physical kiosk networks get priced as cash engines — potentially funding the very streaming build-out Redbox has floated, rather than being killed by it.
- The episode pushes the industry toward pricing power over penetration: once the cheapest player raises rates, the floor comes out of disc rental pricing industry-wide.
The trend: Disc rental and streaming subscription demand are proving less interchangeable than assumed, letting kiosk operators reprice upward even while a rival's price hike stalls.