Retail

Public again: Redbox readies a new era in home entertainment

Recognizing the need to adapt to changing consumer leisure habits, Redbox recently went public with the intention of expanding its role in home entertainment.

Redbox CEO Galen Smith sees a big future for home entertainment as consumers become more engaged with self service. Pictures provided by Redbox and iStock.

June 16, 2021 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

As a brand synonymous with new-release movies and one of the largest operators of self-serve kiosks, Redbox recognizes the need to adapt to changing consumer leisure habits. To this end, the company recently merged with Seaport Global Acquisition Corp., a publicly traded acquisition company, making it a publicly traded company with an enterprise value of $693 million.

Galen Smith

Galen Smith, Redbox CEO, recently shared his thoughts with Kiosk Marketplace about the company's opportunities, the home entertainment business, changing consumer buying habits and the synergies between digital and physical retailing. Following are excerpts from the interview.

Q: Where does the merger with Seaport stand at this point?

A:We expect to close the transaction in Q3 of this year. If all of the shares convert, all of the shareholders, which includes Apollo, will own 59% of the company. The new shareholders will retain the rest of the company. The entire company is Redbox.

We expect to trade on NASDAQ under the ticker RDBX.

Q: Why did you choose to partner with Seaport?

A: They felt very similar to us in terms of the opportunity ahead. They really understood the value that the legacy (Redbox) business provides.

Q: Why did Redbox choose to go public, after it went private in 2016?

A: When we went private in 2016, we were part of Outerwall, which consisted of a number of different kiosk companies under one roof. Each of the businesses were separately managed. The idea was to focus on the best opportunities for each individual business.

For us, that was investing in two things. One was building out our marketing capabilities and assets. Two was building this digital platform to better serve our customers that use our kiosks.

Today, it (going public) is really about the opportunity to bring in additional capital and really drive the business.

Q: Did you achieve what you hoped to achieve under Outerwall?

A: Apollo (Apollo Global Management LLC, which took Outerwall private in 2016) has been a great partner to us. They really allowed us to focus on what was best for Redbox. On the marketing side, we had a great opportunity to build out our loyalty program. We went from 5 million members when we went private in 2016 to more than 39 million members today.

In addition, they gave us capital to upgrade our kiosks. Each of our kiosks now has an EMV reader so we can do chip and pin, but also mobile payment, making it easier for the consumer to use the kiosk.

We also expanded what we call our services business. We've got 1,100 employees roughly that service our kiosks. They're the best in class. We felt we had something to offer other kiosk companies.

Today, if there is an issue with an Amazon locker, it's one of my Redbox employees that goes and services that kiosk.

Now we're at this point where there's an opportunity to have this additional capital and really accelerate the growth that we have ahead.

Q: When we spoke in 2016 right after going private, you mentioned you hoped to add another 1,500 kiosks. Did you achieve that goal?

A:From 2016 to the end of 2017, we installed about 2,000 net new kiosks. We have approximately 40,000 kiosks now around the U.S.

Q: Aside from the EMV and the mobile payment capability, were there any other changes made to the kiosks?

A: Yes. We partnered with a company named Velocity to install digital header screens on top of about 4,000 of our indoor kiosks. It gives us a chance to advertise the latest new movies that we have on the kiosks. That's benefitting the customer, Redbox and the retailer. It's driving more value for what they're hoping to promote in their stores.

Q: What trends are taking place in the kiosk space?

A: One of the most interesting trends over the last two to three years has been the significant growth of the dollar store channel. We've continued to expand across the dollar channel as they've added new stores whereas other channels may have seen some of their stores close.

The two largest retailers that we have are Walgreens and Walmart.

Q: What are your kiosk expansion goals?

A: We don't set goals any more for a kiosk count. What's really important is having the right kiosk counts in the right locations. We do a lot of optimization where we try to make sure we have the kiosk in the best location to serve the customer base.

When we started to use digital products, it caused more people to go to the kiosk. They're getting the latest new releases there.

When we get a consumer to use both the digital business and the physical business, they actually use more of both. Our most valuable customer is one who is doing more of everything.

It's been a great thing to be able to lift all boats as we introduce these products to the marketplace.

Q: How do you characterize the current demand for movie rentals versus streaming video?

A: Customers have more choice for content than ever. I think that's what's really unique about Redbox is we're known for providing the very best value in entertainment.

If you come to the Redbox kiosk you're going to have the latest new movies at the best pricing. We're getting it much earlier than when it shows up on streaming. Two, with how streaming is distributed today, you may have to subscribe to five or six or seven different services to get every movie.

We make it infinitely simpler because you can get all those movies at Redbox.

Even what we see in terms of what we offer on Redbox free live TV or ad supported on-demand services, we see an opportunity there to really lean into movies. That is our differentiator.

Q: How is the Redbox free TV doing?

A: We've got a little over 95 channels on our live TV service today. We're continuing to add channels as we go. One of the things we launched in November/December was the ability to watch a movie on demand with ads. There's going to be a certain number of house ads, which advertise things like the mobile app and how to use that so you can reserve the latest movies at the kiosk. It gives us another platform to advertise to customers about the end-to-end solution we can provide them for content.

The live TV is also integrated with video on-demand.

Q: How is the disc rental business doing?

A: We saw a reduction of about 50% fewer movies because of COVID. Obviously the physical business has been impacted by COVID. Movie theaters shut down for 12 or 14 months. Most of our movies are coming through those movie theaters.

What we're really excited about is the country is opening back up. We think we're going to have more movies in 2022 than we've had in five years.

Q: Will you be offering ultra high definition?

A:We do offer it on certain movies. It's got to be the right type of movie. It works really well on action. It's more expensive for us to provide that, and as a result, we have to charge a premium to the consumer.

We charge $2.50 a night for ultra high definition.

Q: What is Redbox going to be?

A: Redbox has always been about content for the masses. It's about providing the best quality home entertainment for everyone. We want to be able to offer more choices to consumers than anybody else.

One of the most important things we're doing is this incredibly powerful loyalty program. We've got 39 million members and we can reward them to do lots of different things.

One of the things we started building in 2019 was acquiring, distributing, producing films that we know our consumers will love. As studios have been closed over the last number of months, we've been able to bring out our own movies and release those.

Not only can you rent it from Redbox, but you can rent it on Amazon or iTunes, and every time a customer transacted there, they paid us because we own those rights to the movie.

We can help drive content to their (competitors') platforms through Redbox Entertainment, or partner with them to help drive their subscribers, because what we won't do is get into subscription video on demand ourself.

I don't see us as competing with Netflix, I see us a complementary to Netflix because we can help get their customers get theses new movies that aren't available on Netflix.

Q: Who is your main competitor?

A: Obviously we're competing with what consumers are doing with their time. We're competing for consumers' time.

Q: What customer experience technologies are you excited about?

A: One of the things we built was a digital loyalty card. You walk up to the kiosk, you use your NFC chip and your phone, and it signs you in and gives you a personal experience at the kiosk. Now I know what movies you've already watched. I know what you haven't watched and I know what preferences you have.