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Redbox Expands Convenience Store Presence

16 Sep, 2010 By: Erik Gruenwedel

Redbox Sept. 16 said it signed distribution agreements with several smaller convenience store chains in the Southeast, Northeast and Midwest.

The Oakbrook Terrace, Ill.-based Coinstar Inc. subsidiary said it inked deals to install DVD/Blu-ray Disc rental kiosks in EZ Mart Stores, Fastrac Markets, Murphy Express and VPS Convenience Store Group (Worsley Companies). The deals represent more than 1,700 new locations for Redbox kiosks, according to analsyt Eric Wold with Merriman Curhan Ford in New York.

With more than 24,000 kiosks in operation, Redbox already has a major footprint at the convenience store level, including 7-Eleven, Circle K, Pantry, ExxonMobil, Kum & Go and Stripes, among others.

“The convenience store channel has played an important role in [our] success and presents a great opportunity for future growth,” said Redbox president Mitch Lowe, in a statement.

Together with competitor Blockbuster Express, $1-per-day DVD rental kiosks now can be found in more than 31,000 retail locations nationwide – a geographic footprint industry experts say could double by 2013 with the departure of Movie Gallery, Hollywood Video and downsizing of Blockbuster stores.

Indeed, analyst Wold said Redbox has installed about 8,500 new kiosks this year and expects the company to increase it presence by more than 7,200 units in 2011. Wold believes the market potential for kiosk vending could top 100,000 locations.

He also expects Redbox in the ongoing third quarter to rebound the previous quarter's inventory issues and post an 8.4% increase in revenue per average in kiosk.

"Not only do we believe Redbox management gained important knowledge during Q2 and the early part of Q3 about the impact of windows and proper inventory management, but the fact that the Redbox kiosks will have DVD content from every studio during [Q3] (with substantial reductions in costs for the three windowed studios) should lead to stronger utilization and revenue per kiosk along with an improvement in [pre-tax] margins," Wold wrote in a note.

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