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Analyst: Xbox One Used Game Policy a Boon to PS4, Little Impact on Redbox

17 Jun, 2013 By: Erik Gruenwedel, Chris Tribbey

Microsoft’s recent admission that it will limit the number of times gamers can share used titles on the pending Xbox One console, among other restrictions, should be a windfall to the new PlayStation 4 platform and have little impact on Redbox kiosks, an analyst said.

Redbox rents Xbox, PlayStation and Nintendo Wii titles in select kiosks.

B. Riley & Co. analyst Eric Wold estimates video games will represent 3% to 4% of transactions and 6% to 8% of revenue for Redbox during 2013.

While Xbox represents 35% to 40% of the previous generation of consoles, Wold believes Xbox One games would represent just a fraction of rental demand within the initial years after launch as ownership ramps and the majority of consumers remain focused on using their prior generation-consoles.

The Los Angeles-based analyst pegs a potential loss of less than 1% of Redbox transactions and less than 2% of Redbox revenue annually from the Xbox One policy.

Wold cited an ongoing Amazon poll in which respondents prefer the PS4 to the Xbox One by a ratio of 18 to 1, due in part to the used game issue. He said that regardless of policy, Redbox is not dedicated to game rentals and can allocate kiosk space for any type of disc rental: DVDs, Blu-ray or games.

Indeed, Redbox margins on movies (55% to 60%) is higher than games (less than 50%).

“Not only would a worst-case scenario likely represent minimal impact to overall disc rentals, but we believe the PS4 is more than likely to gain market share in response and Redbox could easily shift movie/game inventory to offset the lack of Xbox One titles,” Wold wrote in a June 17 note.

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