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Analyst: Redbox Undermining DVD Value

5 Aug, 2009 By: Erik Gruenwedel

The weed-like emergence of Redbox’s $1-per-day DVD rental kiosks across the country could render DVD movies below commodity-priced status, according to Pali Capital analyst Richard Greenfield.

Greenfield, in a research note, cited an online banner ad from Albertsons that offered five free one-day Redbox rentals in addition to a $5-off Albertsons coupon with the purchase of more than $25 worth of Proctor & Gamble products.

“Movie studios rely on the sale of DVDs, yet it would appear increasingly difficult to sell DVDs at $15-$20 a piece, if consumers believe movies are only worth $1/day, let alone ‘free’ with some groceries,” Greenfield wrote.

The analyst said studios and cable operators banking on increased margins via day-and-date video-on-demand (VOD) offerings (including iTunes) on new release titles priced from $3.99 to $4.99 could create the impression among consumers that other forms of home entertainment (notably sellthrough) are “terribly” mispriced.

“Worse yet, both VOD and iTunes often do not even have movies available the same day they hit Redbox,” Greenfield wrote.

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