Rentrak DVD Revenue-Sharing Grows in Q37 Feb, 2002 By: Joan Villa
In its first significant foray into DVD, distributor Rentrak Corp. derived nearly 14 percent of its revenue-sharing business from the format during the quarter ended Dec. 31 and recorded a first-ever profit for e-fulfillment subsidiary 3PF.
The distributor emphasized profits over revenue for the third quarter ended Dec. 31, reporting a tenfold increase in net earnings to $2.2 million versus the year-ago quarter. For the nine-month period, Rentrak's combined net earnings for both its pay-per-transaction (PPT) and e-fulfillment divisions totaled $7.3 million or 68 cents per diluted share, “within striking distance to meet or exceed our target by fiscal year-end,” noted chairman and CEO Paul Rosenbaum. However, the quarter's total revenue dropped to $26.4 million from $32.8 million in the same period last year.
Revenues at the company's 3PF division also declined to $6.4 million from $7.5 million in the year-ago quarter due in part to the loss of bankrupt customer CyberRebate, which represented $2.4 million in sales last year, he said. However, the division showed its first-ever profit of $503,000 or 5 cents per diluted share. To further lower costs and enhance profitability, the company will lease out its Columbus, Ohio, warehouse, Rosenbaum said.
Rentrak entered the “DVD revenue-sharing business in a big way” over the three-month holiday period, Rosenbaum said, shipping 120,082 DVDs and 757,189 videocassettes, a 9 percent increase in total units from last year. He remains “highly confident” that Rentrak will sign more studios to DVD revenue-sharing agreements “in the near future,” he added.
“Despite increasing demand for PPT, competition for the home video consumer dollar was indeed fierce,” Rosenbaum said on an earnings call last week. “There were so many titles in the market that it was very difficult for individual titles to generate the [expected] revenue.”
In addition, seasonal sellthrough titles such as Dr. Seuss' How the Grinch Stole Christmas, Shrek, Pearl Harbor and Rush Hour 2 temporarily competed for market share against revenue-sharing cassettes, he added — a situation that has not extended into the current quarter, when there are typically more movies released at rental pricing. Current rental titles like The Fast and the Furious and American Pie 2 are strong performers so far this year, he said.
Rosenbaum is also conducting a multi-city tour to meet with investors and drum up enthusiasm for the company's stock and its new foray into data processing for video-on-demand and other industries outside of entertainment. Rentrak has met with studios to help analyze DVD adoption trends and provide specifications for VOD — both within the scope of monitoring and interpreting transactional data, he said.
“The thing that separates Rentrak [from other data-collection services] is we can take the data collected and turn it into valuable information that companies can use to make critical decisions in the pathway they wish to take,” he said.
Rentrak's stock closed down 7 percent at $7.25 per share on the earnings news, but overall the equity climbed 28 percent last month and nearly tripled since last February, when it was trading for $2.20 per share.
Bob Alexander, president of industry research firm Alexander & Associates, attributes the rise to Rosenbaum's emphasis on profits and cost-cutting. “The underlying reason is that the company is in a lot better shape than it was,” Alexander said. “It's due to an emphasis on profits over revenue, an emphasis on fine-tuning their [PPT] offering, penetrating their market better and building on their strengths.”