Redbox Hopes to Survive the Netflix Craze by Launching a Ticketing Business

You see them at almost every 7- Eleven Store; they’re the Red metal boxes full of $1 videos for rent that companies like Netflix, Comcast and others offering online movie entertainment have successfully targeted. However, Redbox has been putting up a good fight and recently the operator of 38,500 Kiosks launched a ticketing business Wednesday with Philadelphia as its first test market. Its second market will be Los Angeles where the company plans to enter the ticketing business in early 2013, according to the Los Angeles Times. Ultimately, Redbox hopes to survive the growing Netflix craze by  launching a diverse ticketing business that can handle all events.

Coinstar Inc.’s Redbox is now hoping to shake up the ticketing business, selling seats to live events with just a $1 fee tacked on.

The initiative doesn’t mean shoppers will be able to pick up front-row Madonna tickets along with a quart of milk at the supermarket. Instead, Redbox is likely to offer tickets that might not sell otherwise, such as nosebleed seats for concerts that aren’t sold out.

The company will sell tickets at its kiosks and on its website, though buyers will have to either collect the tickets at the venue or print them at home.

“We have credibility as an entertainment brand and feel like we are a great source of discovery,” said Redbox President Anne Saunders, adding that the Illinois-based company emails 43 million customers regularly.

Unsold tickets are a perennial challenge for the concert and sports industries, in which large numbers of seats routinely sit unfilled or are unloaded for deep, last-minute discounts.

Redbox is starting with a limited number of events, all in a single market, Philadelphia, where it is selling seats for a Nov. 28 Carrie Underwood show at the Wells Fargo Center arena. Redbox executives declined to say how many of the venue’s 19,500 seats they would be selling.

On its website, tickets are identified only by row and a range of seat numbers, not specific seats.

The company also is selling tickets for Villanova University football games and Nascar races at the Pocono Raceway in Long Pond, Pa.

Redbox says that its kiosks and website conducted an average 59 million transactions a month in April, May and June of this year. Mark Achler, Redbox’s vice president for new business and strategy, said the company was still working on finding new sources of tickets.

The ticket industry has grappled for years with the question of what to do with tickets that haven’t sold by the time an event starts. Giving them away or selling them for a discount is one obvious way to get some return on an otherwise unsold and wasted ticket. But event promoters are wary that training customers to wait for last-minute discounts could undermine the value of their tickets.

Ticketmaster and smaller competitors already have exclusive contracts with many of the most popular concert locations. But Redbox sees broader opportunity in selling tickets to museums, fairs, small concerts and other events in communities.

“The majority of what we are going to focus on is the broad live event marketplace, but we will also be doing our fair share of concerts and sports,” said Mark Achler, senior vice president of new business, innovation and strategy. “We’re talking to all the major national players [in live events.]”
The ticketing initiative is a way for Redbox to grow its revenue without installing new kiosks — a difficult task given its already broad coverage of the entire U.S. — or putting new products into machines already packed full of DVDs and video games.

Mr. Achler said he believes that Redbox, as an impulse purchase, can help unload tickets without diminishing more traditional sales channels.
“We can help move inventory,” he said. “We can be incremental without being cannibalistic.”

The promise of just $1 in service fees is clearly a swipe at Live Nation EntertainmentInc.’s Ticketmaster, the dominant force in the industry whose fees can tack on several dollars to the price of a ticket. Those ticketing fees have long been a sore point among some fans.

Ticketmaster declined to comment on Redbox’s plans.

Redbox President Anne Saunders said the $1 that the company collects per ticket is enough to justify the endeavor, pointing out that the ticketing business can piggyback on Redbox’s existing operations.

Among other things, she said, “it will help drive our core business. There’s all kinds of virtuousness here.”

The strategy creates a potential new challenger to Live Nation Entertainment Inc. LYV, which is the world’s largest ticket seller through its Ticketmaster division. Ticketmaster recently has faced another new entrant in the market, as rival concert promoter AEG Live launched its own ticket-selling service last year.

Redbox’s flat $1 service fee is a key differentiation from the Ticketmaster, whose service charges have fostered consumer grumbling in the past. The fees prompted a class-action lawsuit in 2003 that alleged the company overcharged customers.

Ticketmaster representatives didn’t respond immediately to a request for comment about the Redbox business and Ticketmaster’s current fee schedules. According to Ticketmaster’s website, its fees vary by event.

Coinstar executives have continually reiterated that its physical rental business still has a long runway ahead of it. Redbox still has more share to capture as brick-and-mortar rental shops fade and Netflix Inc. NFLX dedicates the lion’s share of its attention to building its streaming business rather than bolstering its mail-order rental side, they have said.

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