The company isn't simply following Netflix's recent rate increase -- it's responding to new financial regulation
This post has been corrected (see "update").
Has Redbox learned nothing from Netflix? By now, you're probably familiar with what Netflix did: it raised prices dramatically, driving a million customers (and counting) to cancel the service. Since the price hike was first announced in July, its stock price has plummeted about 73%. So what would possess Redbox to imitate that blunder? The company says that last summer's Dodd-Frank financial regulation bill deserves part of the blame.
Redbox announced this week that it intends to raise the price of renting a DVD for a day to $1.20 from $1. That's a pretty straightforward 20% increase. This price hike may appear smaller than Netflix's increase, which was as much as 60% for some subscribers.
Still, Redbox customers aren't likely to embrace the change -- especially since they won't get anything in return. Its third quarter earnings announcement states: "The change is primarily due to the increase in operating expenses, including the recent increase in debit card interchange fees as a result of the Durbin Amendment."
I know what you're thinking: what can financial regulation possibly have to do with DVD rentals? You know how they say that when a butterfly flaps its wings it can have unexpected consequences on the other side of the world? This is kind of like that. When politicians in Washington regulate, unintended -- and sometimes even strange -- consequences can follow.