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Redbox Hurting ‘Kung Fu Panda 2’ Sellthrough?

28 Dec, 2011 By: Erik Gruenwedel

Physical sellthrough of the DreamWorks Animation sequel is underperforming while rental triumphs, underscoring the pitfall of day-and-date releases in both channels, an analyst said

Sales of Kung Fu Panda 2 DVDs and Blu-ray Discs continue to struggle while physical rentals of the title flourish — leading BTIG Research analyst Richard Greenfield to question the wisdom of DreamWorks Animation releasing new packaged=media titles day-and date with kiosks and video stores.

Specifically, Best Buy Co. in its Dec. 25 weekly circular advertised the Kung Fu Panda 2 Blu-ray combo pack for $14.99 — 35% below the $22.99 price promoted for the Dec. 13 street date. Greenfield believes DreamWorks Animation is cutting the wholesale price on discs in addition to Best Buy reducing its margin. He doubts Best Buy would put Panda 2 on the cover of its weekly circular without a significant price break from DWA.

“While Panda 2 home entertainment unit sales may improve following the price cut, we believe wholesale price reductions will wipe out the benefit,” Greenfield wrote in a Dec. 27 post.

Indeed, Panda 2 finished fourth on the first-week Rentrak DVD sales chart and No. 2 on the Nielsen VideoScan DVD/Blu-ray Disc sales charts — rankings Greenfield believes DWA will be hard pressed to maintain. The title finished first on both the Home Media Magazine weekly rental chart and Redbox DVD rental chart and No. 2 on the Blu-ray chart.

DWA discs are distributed by Paramount Home Entertainment, which allows Redbox to rent new releases on street date through an exclusive agreement. DreamWorks Animation CEO Jeffrey Katzenberg has heretofore followed a party line started by Walt Disney Studios Home Entertainment (since altered), namely that its marquee titles are stronger sellers — irrespective of rental — due to the target audience’s (children) repeat viewing habits.

“We found it quite interesting that at the same time Panda 2 retail sales are significantly underperforming on [disc], it was the No.1 DVD rental at Redbox for the week ended Dec. 20 and the No. 2 Blu ray title,” Greenfield wrote, adding that he remains perplexed by the absence of Panda 2 via transactional video-on-demand. The analyst previously lowered DWA’s 2011/2012 earnings projections due to struggling Panda 2 sales and future sales of Puss in Boots packaged media.

“[It is] quite odd to enable physical rental at $1.29/night [at Redbox], but not enable a digital rental on iTunes or Amazon for $3.99 (standard definition) or $4.99 (high definition),” Greenfield wrote. “If renting is pressuring retail sales, Redbox rentals should be delayed for the same length of time, if not longer than [transactional VOD].”

It should be noted that 20th Century Fox Home Entertainment’s Rise of the Planet of the Apes, which debuted No. 1 on the weekly sales charts the same week as Panda 2, also saw its retail price cut 35% by Best Buy two weeks after release — the new $14.99 price point now mirrored by Amazon.

The title isn’t available in Redbox kiosks until 28 days after the Dec. 13 street date.

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