Redbox Reports Higher Q3 Profit on Lower Revenue29 Oct, 2015 By: Erik Gruenwedel
Last year’s price hike offsets reduced release slate
Redbox is a business predicated on new releases. Faced with scant new studio releases in the third quarter, the kiosk vendor saw its fiscal quarter saved by a price hike initiated late last year.
Redbox Oct. 29 reported Q3 (ended Sept. 30) operating income of $90.4 million, which was 2.4% higher than operating income of $88.3 million during the previous-year period. Revenue declined about 10% to $395.4 million, from $435.1 million a year ago.
Redbox, which had projected a sluggish quarter, saw those concerns come to fruition as it generated 23% fewer rental transactions at 132.6 million, from 170.8 million transactions last year. The kiosk vendor attributed the decline to a box office that was 45.3% lower year-over-year and included seven fewer releases, a higher impact from secular decline in packaged media, and lower demand from price-sensitive consumers following price increases.
While some consumers balked at the weak release slate and price hike that increased daily rentals to $1.50 for DVD, $2 for Blu-ray, and $3 for video games, those who did rent generated 16.5% higher gross margins for Redbox.
Net revenue per rental was $2.96, an increase of 42 cents from $2.54 per rental a year ago. The increase was partially offset by a decrease in Blu-ray Disc revenue due to fewer BD releases; and a decrease in video game revenue resulting from consumer transition to new-generation platforms and a lack of new-release content related to the transition and seasonality of publisher release schedules.
"Our performance in the quarter demonstrates our ability to continue delivering strong financial results despite exceptionally weak content that impacted revenue and rentals in our Redbox business,” parent Outerwall CFO Galen Smith said in a statement.