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Analyst: Redbox to Gain From Netflix Price Increase

17 Aug, 2011 By: Erik Gruenwedel

Pundits believe Netflix will overcome projected 15% loss of subscribers following Sept. 1 price increase for combined streaming and disc membership

Redbox can expect a surge in usage when Netflix Sept. 1 implements its 60% price increase to subscribers who stream and rent physical discs, an analyst said.

Michael Olson, senior analyst with Piper Jaffray in Minneapolis, wrote in an Aug. 17 note that 24% of Netflix subscribers in a survey said they would use Redbox rental kiosks more frequently following the rate hike.

About 40% will switch to the less expensive streaming-only option for $7.99 per month, while 15% will drop Netflix completely.

“Specifically, 8% will use Redbox more because they are quitting Netflix and plan to replace those movies with DVDs from Redbox, while 16% are switching to streaming-only on Netflix and plan to replace the DVDs they were receiving from Netflix with DVDs from Redbox,” Olson wrote.

The analyst cited the figures based on a survey of 350 Netflix subscribers, which represent just 0.000014% of the service’s 25 million members and could be argued as statistically insignificant.

Interestingly, the percentage of Netflix subs that would opt for streaming only is down 10% from the percentage of respondents currently streaming with a disc option.

Regardless, Olson believes Netflix will weather the attrition and 5.2% churn rate (1% higher than the second quarter) and still be able to meet Wall Street’s estimate for $819 million in revenue and $1 per share in income.

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