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Redbox Eying Catalog Rentals

16 Nov, 2010 By: Erik Gruenwedel

While Redbox continues to ready a digital strategy for launch next year, its customers want expanded content offerings, including catalog titles, a senior executive said.

Speaking Nov. 16 at an investor event in New York, Scott Di Valerio, CFO with parent Coinstar Inc., said a recent user survey found that 27% of respondents covet greater title selections, followed by increased copy depth (21%) and shorter lines (6%).

Di Valerio said Redbox kiosks have become synonymous with new releases, which he said is akin to the “outside wall” of the video store.

Indeed, with Redbox representing nearly 28% market share in the rental market through the third quarter, Di Valerio said the responding decline in video store penetration (38.5% to 24.2%) and surge in by-mail distribution (catalog-driven Netflix) from 30% to 35% underscore the need to diversify content selections.

“What our consumers are asking for is that every once in a while they may want to watch a little older title or have access to that,” he said, without elaborating further.

The CFO said 65% of Redbox users identify themselves as digital consumers familiar with downloading content, which is 13% higher than the general population.

Di Valerio reiterated previous management comments that Redbox is working with partners to roll out a kiosk-centric digital strategy next year.

“Whatever [digital] partnership we come up with will leverage the kiosk and expand utilization of the kiosk as opposed to reduced utilization,” he said. “We believe the physical space has quite a bit of tail left in it. It should not take away from the kiosk.”

Di Valerio said Redbox had no plans of altering the current $1-per-day rental price point despite acknowledging there to be a bit of “elasticity” to it.

“We don’t believe at this point it is the right lever to pull,” he said, adding that with Blu-ray titles renting for $1.50, and video games for $2, a price migration is already in place. “We don’t see increasing the price for standard definition [DVD] in the near future."


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