Redbox's company Outerwall has been losing revenue ever since they increased their price on DVD's, Blu-rays, and video games by 25 - 50%. This raised the cost of DVDs to $1.50 and Blu-rays to $2. This increase in price has caused a 13% decrease in rental activity. This decrease can be made up by the increase in Netflix subscribers. This decrease in rental activity because the price went up shows that Redbox is elastic, because the small $0.30 change in price caused a larger change in quantity. This is because Redbox can be referred to as a luxury and has many substitutions such as, Netflix.
Netflix gained 15.5 million subscribers for video streaming the year that Redbox increased their prices. This shows that tastes have changed the demand for watching movies from actual DVD rentals to streaming. How Redbox's price increase has affected the demand of Redbox and Netflix can be seen in the supply and demand graphs below.
The article this blog was written about can be found at: http://www.fool.com/investing/general/2015/08/03/redboxs-loss-could-be-netflixs-gain.aspx
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