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Coinstar: Redbox Consumers Accepting Price Increase

12 Apr, 2012 By: Chris Tribbey

Redbox parent Coinstar April 12 said it expected both earnings and revenue for the first quarter to exceed expectations, largely thanks to positive consumer acceptance of the price increase for DVD rentals.

Redbox raised its $1-a-night fee to $1.20 in late October. In a statement Coinstar said “that the increase in consolidated revenue was driven by stronger-than-anticipated consumer demand at Redbox throughout the quarter, particularly during February and March, reflecting, in part, better-than-anticipated consumer acceptance of the price increase for Redbox standard-definition DVD rentals.”

Coinstar expects first-quarter revenue between $567 million and $569.2 million, and income from continuing operations between $53 million and $54.3 million. Earnings per share should hit between $1.62 and $1.66.

Redbox saw better-than-expected rental numbers for several titles, including Moneyball, Puss in Boots, 50/50, In Time, Abduction and Mr. Popper's Penguins.

The expected first-quarter results also reflect “lower-than-expected direct operating costs at Redbox” in regards to the company’s workaround program, which has seen Redbox acquire Warner Home Video DVDs from sources other than the studio since the beginning of February.

For the full year 2012, Coinstar management now expects revenue of $2.15 billion to $2.28 billion. The company will announce first-quarter results April 26.

John Kraft, analyst with D.A. Davidson in Lake Oswego, Ore., said the list of positives in Redbox’s first three months of 2012 was noteworthy, including the Warner workaround being a minor event and Universal renewing its 28-day agreement.

“Today’s release should erase concerns about price increase-driven attrition and leave investors to speculate about how accretive the Blockbuster Express acquisition and the new joint venture with Verizon will be,” Kraft wrote in a note to investors. “At the end of the day, Coinstar’s competitive position and value proposition remains clear; the DVD format remains the lowest-price rental option and the new digital partnership should help retain attrition previously expected to shift to streaming.”


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