DVD Drives Rentrak Quarterly Revenue Up 71 Percent16 Aug, 2004 By: Erik Gruenwedel
Spurred by modifications to ongoing DVD/VHS rental-agreements with MGM Studios, 20th Century Fox Entertainment and first-time deals with Sony Entertainment in Canada and Paramount Studios in Los Angeles, Rentrak Corp. posted first-quarter fiscal year 2005 (ended June 30) net income of $1.4 million, or 13 cents per diluted share, on revenue of $25.3 million, compared to $131,000, or 1 cent per diluted share, on revenue of $18.9 million during the same period last year.
During a call today with investors, Rentrak chairman and CEO Paul Rosenbaum said the company is in renegotiations with a key retailer responsible for 17 percent of its fiscal year 2004 revenue and an “even greater share of revenues” in this quarter.
Portland, Ore.-based Rentrak's distribution business is built on a pay-per-transaction (PPT) model that like much of the traditional video rental business is under siege from sell-through and other delivery options, including video-on-demand (VOD), pay-per-view, personal video recorders and the Internet.
“We are currently in discussions to forge a new agreement, but the volumes in any new agreement are likely to be lower than in the current agreement,” Rosenbaum said.
Rosenbaum admitted the retailer's alternative to a new PPT agreement is to buy product directly from the studios, but he said Rentrak is prepared for that scenario.“If that is the case … we will do direct reporting with the studios,” Rosenbaum said. “[But revenue] will be less if we go [this] way on it.”
The company three years ago initiated a data collection business designed to receive retail data from brick-and- mortar and online locations on DVD/VHS, video games, consumer electronics and computer–related products with the intention of selling the information to studios, video game publishers, software publishers, computer-related manufacturers and consumer-related manufacturers and vendors.
Rentrak, which claims to have a box office data collection business with all of the major studios except Warner Bros., announced that it has begun an on-demand business model in the cable industry, including 12-city pilot agreements with Comcast, Insight Communications and MusicChoice.
Future plans include the establishment of data collection within the syndication industry.
Despite the potential for setbacks, Rosenbaum said he expects the revenue-sharing business model to remain viable for the next five years.
“We believe the revenue-sharing operations will continue to provide the cash flow necessary to fund our new businesses,” he said. “All of the studios seem to be embracing the DVD/revenue-sharing model. There is no reason to assume that they won't continue to do so in the future.”