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Redbox Revenue, Record Rentals Drive Higher Profit for Outerwall

24 Oct, 2013 By: Chris Tribbey

Redbox revenue was up 7% for the third quarter of 2013, helping parent company Outerwall more than double its profit from a year ago.

The kiosk company posted revenue of $587.4 million for the quarter, up from $537.6 million during the same quarter in 2012, while profit was $82.7 million, more than double the $36.8 million the company posted the previous year.

However, operating income was down to $48.4 million compared to $66.9 million, with Outerwall attributing the drop to higher DVD product costs, a weaker release schedule compared with Q3 2012, and increased content purchases under the agreement with Warner Bros. Home Entertainment, signed in Q4 2012.

“Outerwall reported a solid finish to the third quarter as the performance in our Redbox business improved substantially moving through the last few weeks of the quarter,” said Outerwall CEO J. Scott Di Valerio. “While heightened promotional activity had positively influenced traffic at Redbox through July and into August, we identified pressure on revenue from the level of promotional discounts and higher than expected single-night rentals, and recalibrated our marketing strategies to improve bottom-line performance.

“We recognize the shift occurring in our Redbox business as we move from primarily a network expansion focus to an emphasis on incremental growth and network optimization, and the importance of driving bottom line and maximizing cash flow in the business.”

Consumers rented 199.5 million discs during the quarter, a record for any three months in the company’s history, and a 13.1% year-over-year increase. Net revenue per rental was $2.46, down from $2.52 during the third quarter of 2012.

Same-kiosk rentals were up 2.1%, as Redbox generated $491.7 million of Outerwall’s quarterly revenue.

Blu-ray Disc revenue was up 61% year-over-year, accounting for 15.3% of overall revenue for the quarter, and 13% of rental volume, up from 8.6% from the previous year. Top Blu-ray rentals were Olympus Has Fallen, Identity Thief, G.I. Joe: Retaliation and World War Z, all passing more than 1 million rentals during the quarter, with Paramount’s World War Z becoming the first Blu-ray title to hit 1 million rentals in its first two weeks. The Call, Oz the Great and Powerful and Snitch also performed well, the company noted.

Video game rentals accounted for 4.4% of revenue and represented 1.9% of rentals.

For its digital endeavor, Redbox Instant by Verizon, the company reported month-over-month increases in time spent and frequency renting at kiosks and viewing content via streaming. The company announced it will launch on the PlayStation 3 this month, and will be available on the PlayStation 4 when it launches in November.

Redbox remains on track to have as many as 1,000 kiosks in Canada by the end of the year.

The company announced it has increased capacity at existing Redbox kiosks (by more than 80 disc slots) on approximately 34,000 kiosks, with more ready to be upgraded.

Outerwall also announced plans to repurchase an additional $150 million in common stock.

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