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Coinstar CEO: More Discs, Blu-ray to Lift Redbox

16 May, 2013 By: Chris Tribbey

Redbox is becoming more attuned to consumer rental patterns, expects Blu-ray Discs to continue growing as a part of overall revenue and still anticipates overall rentals to increase 5% to 10% annually during the next three years, J. Scott Di Valerio, CEO of parent company Coinstar, said May 16.

Increasing capacity by 80 discs at kiosks isn’t hurting Redbox’s bottom line either, he added, speaking at the annual J.P. Morgan Global Technology, Media and Telecom Conference in Boston.

“Without purchasing additional content, [adding capacity] will allow us to keep content in the kiosk longer, so that when our customers come, their first, second and third choices are there at a higher rate,” Di Valerio said. Redbox kiosks manufactured during the second half of 2012 hold more discs, and the company is upgrading large numbers of existing kiosks to increase capacity as well.

Di Valerio said Redbox — which the company says has a more than 47% share of the physical rental market — doesn’t expect to see a significant drop in physical rentals for another 7 to 10 years.

“The physical market has certainly had a bit of a decline from the [sellthrough] perspective, and a decline in revenues as the brick-and-mortar stores charged a higher price per night for rentals,” Di Valerio said. “People have shifted to Redbox and our $1.20 [DVD] and $1.50 [Blu-ray Disc] price point.

“However, we’re seeing a stabilization in the overall market. … We know who our demographic is, and we have very strong relationships with the studios.”

Redbox rented nearly 200 million discs during the first quarter of 2013, Di Valerio noted, “and that shows people are continuing to come and rent at a very high level,” he said.

“We feel that we can continue to see that growth, continue to build that out,” he added.

That same quarter saw Blu-ray Discs bring in a record 14.2% of Redbox’s $507.9 million in revenue. Blu-ray represented 12% of total rentals (or 23.8 million), up 65% year-over-year.

Blu-ray’s part in Redbox’s growth will continue to be important going forward, Di Valerio said, with Blu-ray expected to contribute as much as 16% of revenue for the second quarter this year.

“It’s hard to get the quality of Blu-ray through a stream like you do on a disc,” Di Valerio said.

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