What Will Happen If Blockbuster Kills Redbox?

Let’s examine something that has been bothering me for a little while. I’ve been renting my movies from Blockbuster and Redbox for years, but now my local Blockbuster store is closing. When I’ve expressed this sadness to friends and colleagues, people just tell me to get Netflix.

Let’s dig quickly into the psychology behind the Netflix/Blockbuster/Redbox choice that each of us has been making. Now, I’m a big fan of technology, but it has its limitations. One of those limitations is that technology can isolate people from the real world. I know all you social media zealots and self-proclaimed experts out there are shouting ‘heresy’ back at me, but hey, that’s why there is a comments box down at the bottom of each article here—for people to engage in a wee bit of dialog.

While social media does serve to connect people, it also serves to disconnect them. To read more on the double-edged impact of social media you might want to check out the book Alone Together: Why We Expect More From Technology and Less From Each Other by Dr. Sherry Turkle.

Layered on top of the tensions between technology, psychology and social interaction is that people are as different as they are the same. As much as we like to think we’re all individuals, when it comes to market dynamics, we tend to be different. That’s why we segment our customers into groups for marketing purposes, test for personality types in team situations, and create separate brands for different groups of customers.

Given all of this, there is an impact of Blockbuster going out of business that I don’t think many people are anticipating, and that is the likelihood that Blockbuster’s demise will actually accelerate the demise of Redbox. This is because, unlike the assumption most people would make, Blockbuster and Redbox are more complements than substitutes. When Redbox emerged people used it as an arbitrage against Blockbuster to get cheaper rentals from Redbox while still retaining the pleasure of physical browsing and the selection advantage Blockbuster provides over Redbox.

For some of us, we just like to get out of the house and see things, touch things, interact with physical things, and to share the purchasing experience with others—especially when it comes to choosing family movies with our kids. Seeing my daughter sprawl Scooby Doo movies all over the floor, touching them, comparing them, examining them, stacking them, putting them back, chatting with me, and several other physical and social interactions can just not be duplicated online. For some people, this is a huge positive. For others, it is actually a negative. Again, people are different, but in similar ways.

But for movie rental customers like me, what happens when Blockbuster goes out of business?

Suddenly, I’m limited to pushing buttons to get one of the few kids movies or new releases Redbox has without the Blockbuster selection to fall back on. The Blockbuster/Redbox combination for me was superior to Netflix, but when you take Blockbuster out of the equation then suddenly Netflix starts to look like the better option.

Uh oh.

So what happens to Redbox if the group of people like me that have been keeping Blockbuster afloat think that Netflix is now the superior solution in a post-Blockbuster world?

The answer is that Redbox is likely to follow Blockbuster out of the market in the next 3-5 years and the Blockbuster/Hollwood/Netflix/Redbox quartet will be replaced by the Amazon/Netflix/iTunes trifecta (with direct rentals from movie studio websites as the great unknown).

Amazon and Apple already sell AND rent movies and while many people out there may not know that they RENT movies, they have the opportunity to build up their awareness and possibly to also introduce subscriptions as Blockbuster and Redbox exit the video rental market.

The reason that Netflix will continue on as the leader in the market while their two major competitors fail is that they had the courage not just to try and disrupt Blockbuster and Hollywood, but also to try and disrupt themselves. To magnify this point, I dare you to try and find their disc mailing plans on their site—go ahead, I dare you. Even though mailing discs is what made them successful, they now want nothing to do with it if they can get everyone to transition to digital distribution.

Each innovation you come up with has a lifespan, so you have to stand ready to innovate again, even if it means disrupting yourself. This is the courage that innovation excellence requires.