Despite not knowing anyone who actually subscribes to them or regularly uses their G-Box kiosks (of which I was one of the first to use at the Texas Tech location), GameFly is doing pretty well. They filed for a $50 million IPO last year, acquired the long-time running Shacknews network of sites, and additionally hired industry veteran Garnett Lee as editorial director half a year later. So what does this have to do with Redbox?
If you recall, Redbox recently got into the game renting business by shoving new releases into their kiosks back in June. Considering the crimson company was rocking some slim pickings with just four titles (only two of which could probably be considered worthwhile), GameFly seemed to be sitting pretty with their more substantial and dedicated kiosk catalog, albeit with a $0.50 a day premium.
Well, starting August 1st, Redbox will be expanding their video game rentals to 27,000 kiosks nationwide, an approximately 5,000 unit increase to almost totally encompass their litany of locations. According to their press release, Redbox has rented out over 4 million games (and 1.5 billion movies) already. Not bad for just a month into this new territory.
This could be trouble for GameFly’s blossoming kiosk run. It’s almost industry news whenever they put out another G-Box (on probably another college campus) whereas Redbox already has over 27,000 installed locations set up and making money. In fact, according to the press release, 68% of the U.S. population lives within five minutes of a Redbox while getting to the nearest G-Box for me would be a nice little 5-hour, 300-mile expedition west to Lubbock, TX.
At some point, I think it’d be safe to say that one will have to concede the kiosk market to the other, and things aren’t looking so great for GameFly. Remember that $50 million IPO I mentioned? Well, it was just the filing and they have yet to actually go public despite having grown 20% per quarter for some time now. Some assume it’s because they are feeling pressure from impending competition (read: Redbox) or that the owners just aren’t willing to sell.
Or it could be that the U.S. Postal Service—cranking up their rates like clockwork—are biting into their profits and scaring away investors. Netflix, their movie-oriented counterpart, got around that with Watch Instantly streaming content, so Gamefly attempted to do the same with rental kiosks and by acquiring Direct2Drive from IGN, but they have encountered seriously contentious friction from the likes of Redbox on the kiosk side of things and services like OnLive on the other (and, to some degree, services like Steam, GOG, etc.). What do you guys think?