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Modified Rev-Share Deals Fuel Rentrak Earnings

17 Nov, 2004 By: Erik Gruenwedel


Rentrak chairman and CEO Paul Rosenbaum announced last week the company could lose a significant DVD/VHS retail client responsible for 32 percent of its second quarter (ended Sept. 30) pay-per-transaction revenue.

Rosenbaum, who wouldn't identify the retailer, said its contract with Rentrak expired in September.

As a result, Portland, Ore.-based Rentrak is aggressively broadening its video-on-demand tracking contracts with cable providers Comcast and Insight Communications — both of which reportedly represent about 46 percent of U.S. on-demand-enabled homes.

For the quarter, Rentrak generated $18.6 million in rental transaction fees, $4.4 million in sell-through fees, $1.1 million in order processing fees and $243,500 in communication fees.

Revenue for the quarter increased almost 85 percent, to $27 million, from $14.6 million during the same period last year.

Ongoing restructuring of rental agreements with the studios and rentailers that emphasize increased DVD unit orders and lower processing and transaction fees helped Rentrak post quarterly income of $1.8 million, or 17 cents per share, compared to a loss of $1.5 million, or 15 cents per diluted share, during the same period last year.

“We expect to announce expansion of our Comcast trial program beyond the Philadelphia market in the coming months,” Rosenbaum told investors in a conference call.

He said that over a six-week period, the weekly volume of on-demand programming transactions recorded by Rentrak for the two MSOs grew from 80,000 per week to more than 7 million.

“The on-demand channel is quickly going to become very important for advertisers, markets, content providers and industry researchers,” Rosenbaum said.

Rentrak is in “active” discussions with 12 other cable companies in an attempt to surpass 50 percent market penetration by the first quarter of 2005, according to Rosenbaum.

“Acquiring 60 percent of the on-demand market data will also increase the syndication value of the data for sale to secondary vendors,” Rosenbaum said.

He said similar initiatives for point-of-sale data from major retailers for movies, games, software and computer-related products is “proving to be a far more competitive and time-consuming undertaking.”

Rosenbaum cited competition from two principal data companies for the sluggish revenue.

“We have found it difficult to obtain and maintain consistent access to the data provided by major retailers,” Rosenbaum said.

Despite a decline on a la carte and subscription rentals in the first three quarters of 2004, Rentrak, including sales data of previously viewed material, saw consumer home video spending increase 1.2 percent compared to the same period last year.

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