October 27, 2011 at 18:47 PM EDT
Redbox Raises Price On Rentals To $1.20
This will not end well. Redbox, in position to be the cheap, local, easy alternative to the confusing, troublesome Netflix, has decided to raise its rates to $1.20 per day. I guess they wanted a piece of Netflix's humble pie. Coinstar, the company that owns the Redbox brand and boxes, explained it this way: "The change is primarily due to the increase in operating expenses, including the recent increase in debit card interchange fees as a result of the Durbin Amendment." And naturally, that cost should be passed right back onto their loyal customers.
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This will not end well. Redbox, in position to be the cheap, local, easy alternative to the confusing, troublesome Netflix, has decided to raise its rates to $1.20 per day. I guess they wanted a piece of Netflix’s humble pie.

Coinstar, the company that owns the Redbox brand and boxes, explained it this way: “The change is primarily due to the increase in operating expenses, including the recent increase in debit card interchange fees as a result of the Durbin Amendment.” And naturally, that cost should be passed right back onto their loyal customers.

I can’t help but editorialize here. It’s just hard to think of a more wrongheaded and shortsighted decision for them to make. Here they have a strong brand built on thrift and a major competitor being laid low by an untimely and confusing rate change. If they plan on being in business for more than a couple years, maintaining the $1 pricing is essential.

Why not take another tack? Renegotiate contracts with grocery stores and bodegas where the Redbox machine arguably brings in business. Slim the margins elsewhere so you can afford the hit. Or just charge an extra quarter on debit card transactions, and give the customer an option to select a different payment method. Anything but reneging on the deal that made the brand known in the first place.

Netflix lost 800,000 subscribers, and many more have been dissuaded from ever joining. But it’s not an instantaneous change, and Redbox needed to make a soft landing for them, not act with the same entitlement that Bank of America did in passing on the debit fees to customers. People are leaving that bank in record numbers, and I don’t see how Redbox can expect anything different.



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