'The service is shutting down because it was not as successful as we hoped it would be. We apologize for any inconvenience and we thank you for giving us the opportunity to entertain you.'
The service came to market with an interesting hybrid model: $8 got you 4 DVD rentals and unlimited streaming each month. It launched with a very weak catalog of streaming titles, and although the catalog improved it apparently never really caught on with consumers. I wonder if this is more about consumers' preference for Netflix's catalog and Amazon Prime's benefits, or a general shift away from DVD rentals.
According to Redbox's parent company financial filings (Link 1, Link 2), the DVD rental business had been growing in terms of rentals, credit cards used, number of kiosks, and overall revenue until this summer, when things started to slow down. Meanwhile, Netflix's DVD by mail service has been declining for years. It seems natural that consumers would slowly shift away from DVDs (both rentals and purchases), just as we have with music CDs.
One piece of anecdotal evidence from the analytics on my streaming post on CordCutting.tips shows that consumers are more interested in Netflix and Amazon Prime than Redbox Instant. Content may be king, but convenience may be just as important. Redbox kiosks have a lot of great content at great prices, but it's much easier to rent a movie online or just stream something from Netflix. Tying the Redbox Instant service to DVD rentals may have ultimately doomed it from the start.