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Coinstar CEO: Redbox on Path to International Expansion

15 Feb, 2012 By: Erik Gruenwedel

Kiosk rental leader is following parent Coinstar’s coin business foray into the Canadian market

Redbox currently is testing rental kiosks in select regions of Canada and has already installed 160 coin kiosks in Safeways throughout the western part of the country, Coinstar CEO Paul Davis told an investor group.

Speaking Feb. 15 at the Pacific Crest Emerging Technology Summit in San Francisco, Davis said the majority of Redbox expansion in the coming years would occur internationally.

"All of the concepts that we're looking at ... one of the key criterias is that it has international expansion," Davis said.

Nonetheless, Redbox plans to install 4,000 to 6,000 kiosks domestically in 2012 — the majority of locations likely conversions of NCR-owned Blockbuster Express. Redbox this month acquired the rights to those 10,000 kiosk locations — not Blockbuster Express — from NCR.

While admitting to a decline in sales of physical media, Davis said the disc rental market remains strong, adding that Redbox’s continued growth is reflective how consumers are renting movies. He said the number of kiosk installations would slow this year compared to previous years, but that there remains a long tail on disc rentals.

“We feel there’s a lot of momentum in the business,” Davis said. “But we're very selective, we analyze it by market, by kiosk. We look at the penetration of the market, the saturation and we look at on a kiosk-level basis. And we've been pretty good at predicting that.”

The CEO reiterated that Redbox is well-positioned to implement a workaround program for embargoed new releases from Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment. Davis said Redbox remains in discussions with the studios about avoiding a 56-day window Warner recently placed on Netflix discs.

He said the workaround program would preclude acquiring wider title selections, focusing more on movies with the biggest consumer appeal.

"We won't have as many copies of movies in the kiosks and we won't have as many direct-to-video movies," said CFO Scott Di Valerio.

When asked if the current $1 incremental cost per rental disc would go up, Davis declined to discuss specifics.

“We do clearly pay more ... just think how we access the product,” he said.

Separately, the CEO said Redbox generated 4 million Facebook friends as of January. The service also has 36.6 million registered email addresses, which Davis said is one of Redbox’s key marketing assets. The email tally represents a 59% increase from 2010.

Other Redbox metrics presented included 11.2 million monthly visitors to Redbox.com; 1.2 billion consumer impressions monthly; 3.5 million users registered to receive SMS/texts; 6.6 million iPhone app downloads; and 4.7 million Android app downloads.

Finally, Davis offered few additional details on the recent partnership with Verizon for a subscription-based video-on-demand service slated to launch in the second half of the year. He said he was “excited” to tap into the 20% of Redbox consumers who also use Netflix.

Davis expects Redbox revenue to exceed $2 billion in 2012.

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