Redbox - Innovation Has-Been?

Since I was first introduced to Redbox in 2006, I have found them to be one of the most intriguing companies in recent years and are one of the great examples of innovation.  While they have had amazing success, the question I now have is: is Redbox an Innovation has-been? 

If you aren't familiar with the company (which I am not sure how you could have missed the red kiosks located at thousands of grocery stores and pharmacies in the US), Red Box is a kiosk DVD rental service.  The idea is that rentals cost just over a dollar a day and can be returned to any kiosk in the country.

First, I find it fascinating that McDonald's Corporation, a company we associate with as a food service business, was the original funding company.  It is easy to understand the innovation behind launching Redbox, however, if we think of McDonald's as being in the Real Estate business rather than being in the food service business. 

One of the core elements of Red Box is the strategic placing of their kiosks, many of which are located at the golden arches and this thinking by McDonald's was quite brilliant.  McDonald's knew the resource they had in their locations and used this as a distribution channel for many kiosks early on.  Imagine a family vacation road trip.  You stop at a McDonald's for breakfast and rent a couple of movies at a Redbox for the kids to watch on your minivan DVD player.  That night (and five states later) you swing by another Redbox and return the rentals which only cost you a few dollars to rent.

Secondly, I find it strange that a company has grown so large in an arguably dying industry.  While it is true that the DVD rental kiosk was an innovation that helped to destroy the brick-and-motor model of Blockbuster, DVDs are a technology that is arguably on its way out due to online download and streaming options.

The question now becomes, what happens to Redbox when DVDs become obsolete?  Their brand (i.e. "box") is designed around the kiosk, so it will be interesting to see how Redbox deals with the moving trend to streaming videos over the internet.  Will Redbox Instant (their attempt at a streaming service) fail to effectively compete with Netflix for the online market or will they find a way to innovate once again?