With its $1 rentals and kiosks that seem to multiply like rabbits, Redbox seems to have come out of nowhere to dominate the physical rental scene.
The company started in 2003 as a partnership between McDonald's and Coinstar, a coin-conversion-machine manufacturer, with kiosks in Denver McDonald's that spread nationwide as the service became successful.
In 2007, Redbox surpassed the number of Blockbuster locations. Coinstar bought out McDonald's shares in February and continues to ramp up its expansion.
Redbox spokesman Gary Cohen said he expects Redbox to have 20,000 kiosks nationwide by the end of the year. Each kiosk brings in an average of $50,000 a year after three years, he said.
"The ability to rent a movie for a dollar a night is unmatched," Cohen said.
Redbox is constantly conducting customer satisfaction surveys and reports that 80 percent of its renters are happy with the service. "People who know us and use us love us to pieces," he said.
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There is certainly potential for customers to get angry with Redbox — say, if a machine fails to register that a DVD has been returned and sticks the customer with a credit card charge for the full price of the DVD. Cohen said Redbox generally takes a "customer is always right" approach to disputes.
"We're very deferential to the customer," Cohen said.
Redbox owns all its kiosks and dispatches staff members to restock each one with new releases by 12:01 a.m. Tuesday mornings. Redbox decides how many copies of each movie stay in the machine based on the previous week's sales. When it's time to retire a DVD, Redbox sells it online for $7.
Redbox is looking into ways to expand its selection, Cohen said, which could include introducing "art kiosks" that provide more diverse, independent fare. The company is also eyeing Blu-ray and digital downloads, he said, and will implement changes "as the market becomes more ready for them."
