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All Movies Headed Toward ‘Windowed’ Release

2 Aug, 2010 By: Erik Gruenwedel

Fallout from the recent below-par financial results for Redbox continues with William Blair & Co. analyst Ralph Schackart indicating the impact of 28-day delays on new DVD/Blu-ray Disc releases from three major studios remains significant.

Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment have agreements in place with Redbox that call for a four-week delay of new titles. Sony Pictures Home Entertainment, Paramount Home Entertainment, Walt Disney Studios Home Entertainment and Lionsgate, among others, do not.

Chicago-based Schackart said that unlike the second quarter in which Redbox generated 40% of revenue from the delayed Avatar and not-delayed Alice in Wonderland, the current third quarter boasts no major box office titles slated for release.

Long-term observers contend new-release DVD/Blu-ray titles generate upwards of 75% of their revenue potential in the first 28 days of release. This reality will compel studios currently on the receiving end of about $1.1 billion in guaranteed revenue from Redbox through 2014 to reconsider the retail option, according to Schackart.

“We believe the impact of an increasing number of titles delayed 28 days is still too great a risk to get positive on [parent Coinstar] shares,” Schackart wrote in an Aug. 2 note. “Over the next couple of years, we expect all major new releases to move to this model.”

Indeed, the dearth of major new releases in April (and 30% delayed titles in the quarter) contributed to driving down the average daily revenue per Redbox kiosk 7.3% to an estimated $115.60 via 26,900 kiosks, according to Schackart. There were no delayed titles at Redbox in the first quarter.

Average daily kiosk revenue topped $124 during the second quarter in 2009 based on 17,900 units in operation. Schackart revised downward Coinstar’s 2010 revenue projection to $1.47 billion from $1.56 billion.

Notable benefactors from windowed releases are traditional video stores, including Blockbuster, which has been touting day-and-date availability of new releases movies in a national TV spot and online banner ads. The last-standing nationwide rental chain reports second-quarter results Aug. 12.

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