Redbox Not Worried About Streaming Eating Away At Rental Business

Kiosk-based movie and game rental company Redbox is not worried about streaming services like PlayStation Now or the secret tech demo Microsoft is working on impacting its business. That's because, according to Redbox director of video games Ryan Calnan, people still prefer physical discs. And even if streaming does become mainstream, both can live together in peace, he argues.

"I don't see [streaming] as a challenge," Calnan told us. "I think that both can live side-by-side. We're expanding the edges of gaming, and I think that customer is very much attached to that physical product still."

Calnan added, "There's obviously this emotional relationship to the physical disc." Indeed, a recent NPD Group study found that 74 percent of American gamers would choose a physical copy of a game over a digital unit if pricing was the same.

"There's obviously this emotional relationship to the physical disc" -- Ryan Calnan

When PlayStation Now was originally announced in January during the 2014 Consumer Electronics Show, shares of retailer GameStop tumbled, though they have since rebounded.

Also during our interview with Calnan, we quizzed him about when we might see Xbox One, PlayStation 4, and Wii U games in Redbox kiosks nationwide. He said Redbox has already launched a pilot program in 10 markets (Denver, Seattle, Chicago, and Atlanta are a few), and the response has been positive.

"We are testing new-generation product in select markets. We're encouraged by our success so far where we've been testing this product," Calnan said. "We're excited to be rolling this product out over a period of time as our customers transition from the current gen over to the new-generation systems."

While the Xbox One and PlayStation 4 have shown positive signs right out of the gate in the test regions, the same can't be said for the Wii U, Calnan said.

"We've been very happy with the success of Xbox One and PS4; I think we've had a little bit slower [uptake] on the Wii U, much like the retail marketplace," Calnan said. It's no secret that the Wii U has struggled, but Nintendo sees better times ahead, thanks in part to the release of marquee titles like Mario Kart 8 last month and mascot brawler Super Smash Bros. this fall.

So when will Xbox One, PS4, and Wii U games be rolled out to a wider market at Redbox? Right now, it simply makes more business sense to keep the kiosks stuffed with last-generation games because the install base is so much larger than it is for current-generation systems. But Calnan expects that, over time, this will shift.

"For us, it's about adoption to that [new-generation console]," Calnan said. "We obviously have an incredible base of customers that already own the [last-generation consoles] and we're just waiting as they transition over. But we want to make sure that we can offer the current-gen product to all those customers who have not yet transferred over."

Redbox rolled out its video game rental program in 2011, and the company has no plans to slow down anytime soon. Why is it that Redbox has found success where others haven't? According to Calnan, Redbox hits two major notes better than anyone else out there: convenience and price.

"You don't have to make a dedicated trip to find a Redbox. If you're going to pick up milk and bread or you're putting gas in your car, Redbox is there," Calnan said. "And that really gives the opportunity to go ahead and try out the product. A dedicated trip is obviously something where you have to think, 'Oh, I've got to go out and do this.' Redbox is on the way, and very, very convenient because of that. And that $2/day to try out a game, it's a pretty compelling argument for somebody who may not know everything about the latest title that's come out and wants to try it out."