Redbox to close Downers Grove call center, cut 200 jobs

Redbox may be cutting back a portion of its operations, but the DVD rental giant is still growing in a declining industry.

The Oakbrook Terrace company announced plans this week to close its Downers Grove call center by midsummer and is in the process of outsourcing the customer service operations. The new arrangement will result in the elimination of about 200 jobs at the facility, a company spokeswoman said Friday. Redbox leases 24,000 square feet at Executive Towers I, 1431 Opus Place in Downers Grove.

But the video giant will continue to rapidly open kiosks that rent movies for a buck, a force that has competitors scrambling to stay competitive. Retail experts say Redbox has forced traditional video rental stores and services like Blockbuster and Netflix to take note.

Redbox, formerly owned by McDonald's and now part of Coinstar, rents DVDs for $1 a day in soda machine-sized kiosks found locally at Walmart, Jewel and Walgreen stores. The red machines typically hold 630 DVDs with up to 200 titles, updated weekly. Nearly 8,000 new kiosks are expected to open this year, the company said.

Cash-strapped consumers with hectic schedules are driving the company that now runs 20,200 rental kiosks.

"The simplicity of the model from a price and convenience standpoint is hard to beat," said Neil Stern, partner at Chicago-based McMillan Doolittle retail consultant. "I think it's capturing an increasing share in what is a declining market."

Blockbuster, facing financial problems and closing stores, attempted to try kiosk rentals several years before Redbox hit the market.

"The consumer wasn't ready at that time," said Blockbuster spokeswoman Michelle Metzger. "We watched Redbox," she said, adding that Blockbuster is aggressively adding to its brick and mortar stores with kiosks.

Blockbuster stocks its kiosks with a broader selection and charges between $1 and $2 per rental, Metzger says.

Blockbuster has opened 4,000 of the kiosks and has plans to open another 10,000 this year, primarily at convenience and grocery stores, though it is well behind Redbox.

"The issue for (Blockbuster) is that Redbox has cornered a lot of the market," Stern said. "Redbox has a significant advantage."

Redbox and Netflix, a service that lets customers choose movies online and receive them by mail, have made life harder for brick-and-mortar video stores and the retailer that sells videos, experts say.

DVD sales were down 13.5 percent for the first half of 2009 compared to the first half of 2008, according to the Digital Entertainment Group, a trade organization.

Rental revenue is up about 8 percent over the same period, according to the group. The dismal economy has made people think twice about buying DVDs, especially when rental kiosks have made it easier.

Netflix competes with its deep selection. Blockbuster is caught between Redbox and Netflix, Stern added.

What's next? Retailers are coming out with new services. For example, Blockbuster is launching a multichannel distribution platform that's in the testing stages. The effort will allow customers to download movies onto their TV. The cost is about $4 a movie.

Analysts believe with advancing technology, other companies will continue to provide similar services.