Redbox raises prices on its DVDs

The RedBox logo is displayed on a RedBox video rental kiosk Aug. 14, 2009 in San Rafael, Calif.

Jeremy Hobson: Well here in this country today prices are going up
at Redbox DVD rental kiosks, from a $1 to a $1.20.

But as Sally Herships reports, Redbox better be careful not to alienate customers like its rival Netflix just did when it raised prices.

Sally Herships: Netflix and Redbox are video apples and oranges. Netflix offers a library of movies and TV; Redbox only new films. Netflix requires membership, and Redbox is pay-as-you-go. The question is, will customers punish Redbox as much for its price hikes?

Kit Yarrow: They will care. They'll look at this as opportunistic.

That's consumer psychologist Kit Yarrow. She says for new customers and spur-of-the-moment purchases, 20 cents isn't a big deal. But when Netflix raised prices, it lost members -- some to Redbox. For those rental refugees, the price hike can be a sore subject.

Yarrow: That they switched over from Netflix and now Redbox is cashing in.

Redbox says this is the first time it's raised prices for DVDs in eight years. It's passing on costs from a new law that allows debit card companies to charge businesses more for small purchases. The company is hoping to smooth the transition. It's offering a one-month promotion: certain video rentals at the current $1 price.

I'm Sally Herships for Marketplace.

About the author

Sally Herships is a regular contributor to Marketplace.
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In the article you state: "It's passing on costs from a new law that allows debit card companies to charge businesses more for small purchases."
I thought the whole point of the new law was to cap the swipe fee at 22 cents instead of 44 cents, to make it *cheaper* for businesses, which was also the reason many banks wanted to start charging their customers who use their debit cards. Can you look into this? I tried Redbox, but just got a non-reply.

The other group that uses Redbox are people who don't watch enough movies to justify a Netflix account and have had to adapt, since all of the video rental shops in their neighborhoods have gone out of business...

Not sure I agree with the premise of the story, the demographic using red box are the lower end of the economy (the Walmart poor), the ones who do not have enough credit to have a Netflix account, a computer, internet access etc. I do not think a 20% rise in the price of renting a movie will be noticed, what is an extra two bits after you just shopped a wallymart.

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