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CFO: Redbox Taking Contrarian POV on Disc Market

4 Jun, 2015 By: Erik Gruenwedel

Outerwall CFO Galen Smith

Despite the growing prevalence of subscription streaming and transactional VOD, disc rentals remain a stable market, Galen Smith, CFO of Redbox parent Outerwall, told an investor group.

Speaking June 4 at the Morgan Stanley Leveraged Finance Conference in New Orleans, Smith admitted the market for disc rentals is declining, but added that the market should still top $3 billion in revenue this year when combining kiosk, brick-and-mortar and by-mail subscription.

That tally is projected to drop to $2.9 billion in 2016 and to $2.4 billion through 2019, according to industry figures.

Meanwhile, subscription streaming and transactional VOD are projected to generate $6 billion and $3.4 billion in revenue, respectively, in 2015 — increasing to $11.8 billion by 2019, according to Redbox.

In the first quarter, Smith said upwards of 35 million unique consumers rented a movie at least once from Redbox in the period. The executive said Redbox maintains a competitive edge over SVOD and transactional VOD by offering new releases on street date priced from $1.50 a night.

Smith that while packaged media shrinks, he believes Redbox will be able to manage changes within the market over time, such being flexible with variable costs such as credit cards and retail revenue sharing over extended time periods. 

Redbox has also downsized its kiosk footprint, including earlier this year exiting completely the Canadian market. Indeed, the company’s free cash flow has grown from $57 million in 2010 to $384 million in 2014.

“We have a very contrarian view of the [disc] market,” Smith said. “We believe it is going to be robust for many, many years.”


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