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Analyst: Redbox Saw 16% Drop in Average Kiosk Revenue in Q1

8 Apr, 2013 By: Erik Gruenwedel, Chris Tribbey

Redbox had an estimated 16% drop in average revenue per kiosk in the first quarter (ended March 31), due in part to a back-weighted new-release schedule and assimilation of defunct Blockbuster Express units, according B. Riley & Co. analyst Eric Wold.

The analyst believes Redbox, which generated a 28% gain in average kiosk revenue during the same period in 2012, posted more than $45,000 average revenue per kiosk in Q1, compared with almost $50,000 average revenue during the previous-year period.

Redbox’s $100 million assimilation of about 10,000 Blockbuster Express kiosks from NCR Corp. last year is projected to contribute to sequential quarterly average revenue declines through the second quarter. Revenue is expected to increase quarterly starting in the third quarter through 2014 — despite remaining below $50,000 per kiosk.

With Redbox business largely predicated on the strength of new releases, a reduced number of titles in Q1 (down an estimated 13% year-over-year) with middling box office appeal (down 17%) continue to undermine results. Even though the back-weighted release schedule from Q1 could help early Q2 trends, Wold expects the Q2 slate to weigh on rental patterns going forward.

Indeed, average revenue per kiosk is expected to decline 7% decline (up from 3%) in the second quarter as some key releases have 28-day delays to Q3, fueling the ongoing conservative outlook by Redbox (and Coinstar) management.

Through June, there are 39 major disc releases slated, down nearly 14% from 45 releases during the same period last year, according to B. Riley estimates.

“Redbox weakness since Q3 has only fueled the bear argument that discs are quickly going the way of the Dodo,” Wold wrote in an April 8 note. “With the Blockbuster kiosk transition in the past, more targeted marketing strategies and better inventory management (including the implementation of the kiosk capacity enhancements), we would expect to see Redbox rental patterns begin to stabilize in Q2 and put an end to the recent double-digit declines in average revenue per kiosk.”

Redbox reports first-quarter results April 25.

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