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Redbox CFO Expects Q3 to Be Company's Weakest of the Year

30 Jul, 2015 By: Erik Gruenwedel

Outerwall CFO Galen Smith

With a third-quarter (ending Sept. 30) box office projected to be 46% lower in revenue than the prior-year period, including eight fewer theatrical releases, Redbox is expecting a negative impact on its current Q3 financials, Galen Smith, CFO of parent Outerwall, said on the kiosk vendor’s July 30 fiscal call.

Redbox generates the bulk of its revenue from new releases, with box office revenues from $25 million to $100 million each. Smith said the months of August and September are tracking to be “very light” on new releases, with just seven new titles each month.

Indeed, the executive warned that major box office titles released in Q4 typically are earmarked for sellthrough — not rental.

“So, you can have a very big box office, and yet it doesn’t generate a lot of rentals. Really that sweet spot is the movie, comedy or action, with a box office from $25 million to $100 million,” Smith said. 

With studios pushing back theatrical releases this year due to market conditions, the impact on subsequent new-release disc rentals typically results in 8% to 12% fewer rentals, according to the CFO.

“The Q3 box office is looking particularly weak. It’s the lowest box office that I can remember in a long time. It’s important to note that Q3 is expected to be our lowest quarter of the year from a Redbox perspective,” he said.

Meanwhile, following a 13% drop in rental transactions in the second quarter, Smith said Redbox management is analyzing whether price hikes implemented in Q4 last year will create increased rental volatility over time.

The CFO said the trend could see consumers returning to previous rental activity levels or scaling back further, especially on direct-to-video titles.

“The movies are enjoyable and fun to watch. It’s just how do we help educate the consumers that it’s worth that expense. That is something we will continue to monitor throughout the year,” Smith said.


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