Layoffs loom at Redbox

Posted Feb. 18, 2010 at 4:00 p.m.

cbb-a-redbox.jpgBy Wailin Wong and Julie Wernau | Redbox, the DVD kiosk rental chain, said Thursday it is laying off 200
employees at its Downers Grove call center as the company shifts those
operations to an outside provider with operations in Texas and Canada.

“After considering a number of options, it was determined that using a
third party to manage our customer service operations was the best
business decision for the company,” Redbox, which is a unit of Coinstar
Inc., said in a statement. “This decision did not come easily, but it
was ultimately the best option for achieving the level of service we
need to provide our customers.”

Some customer service calls were shifted to the third-party provider on Feb. 15 and the closure of the Downers Grove center will take several months. Redbox said it expects “things to be fully up and running by mid-summer.”

Employees will receive a severance package and outplacement services from the company, and can also apply for other jobs at Redbox or Coinstar, the company said.

Redbox spokesman Christopher Goodrich said the decision was related to an increase in the volume of calls the company now receives and was unrelated to recent revenue hits at the company.

For more than a year, Redbox has been embroiled in legal battles with several Hollywood studios who refuse to sell their new releases to Redbox on their release date, opting instead to ask the kiosk operator to wait about a month or more before placing the DVDs in Redboxes. The studios said the $1 price tag to rent their DVDs at a Redbox was negatively affecting revenue.

As part of a workaround, Redbox was asking employees to travel to big box stores to purchase the DVDs instead, an arrangement, Coinstar said in its most recent earnings call, that was costing between $1 and $2 extra per DVD and led to fewer copies of those disks in their kiosks. The company estimated that the lower supply had decreased revenue in the fourth quarter by as much as $15 to $25 million.

At the same time, two large retail chains – Target and Wal-Mart – announced new limits on the number of DVDs a single customer could purchase at one time, which analysts said further complicated Redbox’s efforts to continue with the workaround.

Both stores claimed that the new limits were not an attempt to target Redbox. Target said the policy had always been in place and that they were simply choosing to communicate the policy more clearly. Wal-Mart said the policy was meant to make its DVDs more accessible to customers and said the limit would last 28 days after the date a movie was released.

Redbox continues to have anti-trust lawsuits against 20th Century Fox Home Entertainment and Universal Studios Home Entertainment and would not comment on the status of those negotiations.

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  1. Brian W. Pucket Feb. 18, 2010 at 2:43 pm

    Redbox is the lowest of the low. First, they have a business model where people on the creative-side of movie making get short-schrift when it comes to getting paid. Now they outsource the few American jobs they DO create to India. Why do I get the sneaky feeling that this operation is run by Dr. Evil or Dan Halen?

  2. Jim Shaffer Feb. 18, 2010 at 3:49 pm

    Wow, what a strong reaction. Redbox is no different from any other company, and their customer service operation is not as mission-critical as it is with other companies, since most of their customer interaction is automated at their kiosks.
    No author or creator has been harmed by Redbox any more than by any other content distribution system. The author/creator signed a contract, and Redbox lives within that contract. If the remuneration’s not enough, don’t sign the contract….

  3. JON WINDY, CHICAGO Feb. 18, 2010 at 4:27 pm

    By providing low-cost readily-accessible DVD’s, Redbox is truly performing a useful consumer service. Anyone who claims otherwise is shilling for the corrupt Movie Moguls.

  4. Joe Redbox Feb. 18, 2010 at 4:28 pm

    The article DIDN’T state that the jobs were shifting to India…they said that they were shifting operations to Canada & Texas. Yeah, both foreign lands…those damn Texans and Canucks!!

  5. ziggy Feb. 18, 2010 at 4:29 pm

    Had a job interview with these guys a few months ago. Glad I didn’t start working there!

  6. Cletis Mcshane Feb. 21, 2010 at 9:46 pm

    The jobs are GOING TO INDIA!!! Maybe not today but, soon. The outsourcer will train their US people on the processes and tasks and then transition that to some overseas facility. It’s the only way the outsourcer can make a buck.
    US labor rates are US labor rates. Sure, maybe it’s a bit less in TX or Canada but the outsourcer mst have bidded BELOW that redbox spends on their customer service otherwise they would have not gotten the business. (Why send it out if it’s cheaper to do internally).
    Not only does the outsourcer have to pay similar onshore rates as redbox would, they have to skim some off the top to make a profit too. I work at the largest HR outsourcing and Benefits mgt firm in the US headquartered right here near Chicago and moving jobs to India is how the money is made.
    Now, some places set up shop in the middle of nowhere where the labor rates are dirt cheap. Rural sourcing it’s called. I have been through this and the quality of people you find in middle of nowhere is far worse than you find near a big city like Chicago. Lets see, either I work at the gas station, the Wal-mart, of that new customer support center.