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Greenfield: Disney Can 'Kill' Redbox

14 Jan, 2011 By: Erik Gruenwedel

While many analysts circled the wagons in support of Redbox after parent Coinstar Inc. pre-announced disappointing fourth-quarter fiscal results, long-time kiosk critic Richard Greenfield with BTIG Research in New York took another view.

The hawkish analyst said Coinstar’s mea culpa regarding mismanaged inventory controls and 28-day new release embargoes, among other issues, falls on deaf ears considering the company had a dry run of the challenges during the second quarter.

“While Redbox makes the excuse that this was their first holiday season dealing with 28-day delayed content and they simply underestimated the impact on their business, we simply do not believe that excuse,” Greenfield wrote in a post.

Indeed, the analyst, who contends the $1-per-day kiosk business model is a cancer to Hollywood’s long-term survival, said Coinstar’s disclosure underscores the fact that Redbox underestimated consumer fickleness.

In addition, Greenfield said higher rental prices for Blu-ray titles (with the lower-priced DVDs also available), coupled with the belief the surge in Blu-ray player sales was due to their Internet connectivity and Netflix streaming capability, undermined BD rentals. He also said Netflix continues to benefit from the fact that 70% of its subscribers opt for catalog titles, not new releases.

More importantly, Greenfield believes Walt Disney Studios Home Entertainment could exercise its “wild card” status by imposing windows on new releases to kiosks — a move Disney CEO Bob Iger has steadfastly refused to do. The analyst believes Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment will now seriously consider extending their embargoes to 60 or 90 days.

In headlining his post, “Dear Bob Iger: You Can Kill Redbox — Help Stop the Devaluation of Movies,” Greenfield reiterated his long frustration that Disney makes available $1 billion movies such as Alice in Wonderland and Toy Story 3 to $1 kiosks on street date.

The analyst contends the Disney/Pixar brand is one of the most valuable in the movie business — a reality that will only enhance with the addition of Marvel titles. He said Disney shifting to a window would send a strong message to the other studios that a key supporter had changed its view.

“We hope that Disney takes note of … Redbox news and begins to place a window on all content they sell to Redbox, as it would be an important step in diminishing the negative impact Redbox is having on the movie industry,” Greenfield wrote.

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