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Redbox to Increase Video Game Presence

28 Apr, 2011 By: Chris Tribbey

Starting June 17 more than 21,000 Redbox kiosks will begin offering $2-a-day video game rentals, expanding on limited market tests the company launched in mid-2009.

Currently 5,000 Redbox locations carry video games along with DVDs and Blu-ray Discs, and the company said more than 1 million games have been rented to date.

The announcement came April 28 as Redbox parent Coinstar reported first-quarter revenue and earnings that beat analysts’ expectations. Revenue for the quarter was $424.1 million, up 31.2% from Q1 2010, and about $15 million more than what analysts had predicted. Coinstar profit for the quarter came in at $8.5 million, compared to $6.4 million in Q1 2010.

“Redbox will increase consumers’ access to video game rentals by leveraging our incredible technology and business model to keep rental prices low for consumers,” said Redbox president Mitch Lowe. “With more than 21,000 Redbox locations slated to feature video game rentals alongside movies this June, Redbox will be the one-stop shop for entertainment.”

Games for all three major gaming consoles — the PlayStation 3, Xbox 360 and Nintendo Wii — will be available, according to Joel Resnik, VP of games for Redbox. Games would represent about 10-15% of all discs in kiosks, Coinstar executives said.

“Redbox will make discovering the latest games as easy as a trip to the local grocery, convenience or drug store,” he said.

For its positive first quarter (ended March 31) results, Coinstar pointed to the growth of Redbox, which chimed in with $362.3 million of its revenue, a 37.7% boost year-over-year. In contrast, revenue from Coinstar’s coin-counting machines grew 2.4% to $61.4 million.


For DVD rentals, Redbox officials said the company raised its market share to 33.2% at the end of the quarter (March 31), up 9.3% year over year. Using data from The NPD Group, Redbox reported that brick-and-mortar stores are down to less than 20% market share.


J. Scott Di Valerio, chief financial officer of Coinstar, said part of Redbox’s positive gains for the quarter came from a reduction in the amount of Blu-rays stocked at kiosks and smarter forecasting for the amount of new release DVD titles consumers want to rent.

“The overall revenue from Blu-ray was about the same as Q4, and … it’s still an overall low percentage of revenue,” Di Valerio said.

Coinstar executives headed off questions about a potential digital delivery partner, saying only that Redbox will announce a partnership some time this year. Analysts have speculated that subscription-based Hulu Plus would make the most sense for Redbox to offer a combined physical and digital subscription product, without Redbox spending more on licensing content.

“We like where we stand in the marketplace … in the physical space,” said Coinstar CEO Paul Davis. “We’re working on an offering that would make sense for all constituents.”

For all of 2011 Coinstar expects revenue between $1.73 billion and $1.85 billion and earnings per share between $2.75 and $3.10.



About the Author: Chris Tribbey

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