Netflix CEO explains why he won’t expand into DVD kiosks, despite threat posed by Redbox

On The Call: Netflix CEO Reed Hastings

Almost everything has been going right for Netflix Inc. for the past year, except for one nagging issue: some consumers are so strapped for money that they have been canceling the DVD-by-mail rental service and getting their entertainment fix from in-store kiosks that dispense discs for $1 per night.

The leading operator of DVD kiosks, Coinstar Inc.’s Redbox, estimates about 5 percent of its renters are former Netflix subscribers.

Netflix CEO Reed Hastings doesn’t doubt it, but isn’t worried enough about the threat posed by Redbox to expand into in-store kiosks. He explained why during a Thursday conference call after Netflix released its second-quarter earnings.

QUESTION: Last quarter you said you had no interest in entering the kiosk business. Has that sentiment changed at all now that it appears studios are warming up to the concept?

REPSONSE: No, not particularly.

The kiosk businesses are very good vending machine businesses. Coinstar (has) been doing vending machines on a global basis for a long time and they have a wide range of vending solutions and presumably they will come up with more and more vending innovations. So they’re organized horizontally as a vending machine company.

We’re organized vertically and we happen to be in DVDs now. It’s DVD and (Internet) streaming as a movie brand. Netflix will always be in movies, not in various ways to ship or move discs or any other aspect. So the businesses are really organized quite differently and we have no incentive to go into kiosks. We are putting all of our innovation efforts ongoing into streaming.