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Redbox Headed to CVS/Pharmacy

5 Aug, 2010 By: Erik Gruenwedel

In a major win for packaged media kiosk vending, Redbox Aug. 5 said it will install DVD/Blu-ray Disc rental kiosks in thousands of CVS/pharmacy locations nationwide, in Puerto Rico and in subsidiary Longs Drugs in Hawaii.

Oakbrook Terrace, Ill.-based Redbox said it would install 700 kiosks at CVS/pharmacy locations by the end of the year, with further rollout slated in 2011. CVS/pharmacy has about 7,000 stores globally.

The deal represents a major coup for Coinstar-owned Redbox, which is locked in a retail land grab with NCR Corp., the latter rolling out Blockbuster Express kiosks under a license agreement with Dallas-based Blockbuster. With plans to install 10,000 Express kiosks this year, NCR, in a recent financial call, indicated it wasn't sure whether it would expand beyond that install base.

Coinstar last week reported an unexpected hiccup for Redbox most recent fiscal quarter when a combination of studio-delayed new releases and excess disc stock resulted in revenue declines.

Redbox is currently available at approximately 23,000 locations and has rented more than 880 million DVDs to date.

“We’re pleased to add CVS/pharmacy stores to our list of convenient locations for movie lovers to rent films,” said Redbox president Mitch Lowe, in a statement.

Michael Pachter, analyst with Wedbush Morgan Securities in Los Angeles, last week predicted Redbox would announce a major retail agreement with a marquee chain.

The announcement also follows yesterday's comments by Time Warner Inc. CEO Jeff Bewkes, who said 28-day delays of new release movies imposed by Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment on Redbox and other kiosks were having the desired effect of maintaining a retail window, including transactional video-on-demand (VOD).

Eric Wold, analyst with Merriman Curhan Ford, said the announcement explains why Coinstar upped its expected kiosk installation estimate by 500 for the year. He said CVS and Redbox had tested kiosks in October.

“We still don’t know how many will be installed with CVS next year, but the ‘thousands’ referenced in the press release is a solid indication and the 7,000-plus CVS locations in the U.S. would be a strong customer added to the Redbox pipeline,” he said. “And it’s clear that Redbox is successfully winning the major national customers, while NCR is taking the ones that are either under the radar or not passing Redbox’s minimum hurdles.”

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