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Outerwall CFO: Redbox Continues to Grow

4 Dec, 2013 By: Chris Tribbey

There’s a reason retailers — even those that sell DVDs — are increasingly willing to have a Redbox kiosk or two in their stores, according to Galen Smith, CFO of Redbox parent Outerwall.

“You think about our Redbox business, and we’ve got relationships with the top 10 grocery chains, the top mass [merchant] with Walmart, the top drug stores with CVS and Walgreens, the top convenience with Circle K and 7-Eleven,” he said Dec. 4, speaking at the Bank of America Merrill Lynch 2013 Leveraged Finance Conference. “We’re in the places where America shops, and we’ve got these great relationships with retailers because we take space that may be underutilized, and make it some of the most profitable space in the entire store.”

The low price points for rentals combined with the convenience of kiosks has quickly made Redbox the No. 1 physical disc rental outlet in the nation, a distinction Redbox first earned in 2011 and hasn’t relinquished. There are now 43,600 Redbox kiosks in the United States and Canada, which have rented out more than 3 billion cumulative discs, covering DVD, Blu-ray Disc and games.

For the year, Redbox is aiming to have 53% industry market share of the industry’s physical rental revenue and 66% of that revenue by 2016.

“Once you build out this kiosk footprint, they become great generators of cash flow,” Smith said. “And we’re really at that point with our two businesses, Redbox and Coinstar.”

Blu-ray Disc and gaming rentals are picking up, and “that will grow over the next few years,” Smith said. He also made a point to praise Redbox’s current relationship with the major studios, a relationship that had been adversarial at times in the past, due to street dates and sellthrough concerns.

“We buy a lot of content from them and are able to make it very profitable both for them and for us,” Smith said. “Our relationships have continued to grow and develop. We see a long-tail to rental.”

Smith added that by the end of 2013 there will 1,000 Redbox kiosks in Canada, with another 1,000 to be added in 2014.

“It’s been a slower install process than expected,” he said. “But if you think about the competitive landscape, the traditional brick and mortars, Rogers [Plus] and Blockbuster are now both closed up there. So we see there is this opportunity to fill this gap with our kiosks, and we can do it very efficiently.”

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