Analyst Expects 'Solid' Fiscal Quarter From Redbox

30 Mar, 2015 By: Erik Gruenwedel

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With the fiscal quarter of many corporations set to end March 31, Redbox’s Q1 financial results are expected to be strong due to a recent price increase and new customer loyalty program, according to Wedbush Securities Michael Pachter.

Last December, Redbox upped daily rental prices for DVDs (up 25% to $1.50), Blu-ray Discs (33% to $2) and video games (50%to $3), while establishing stronger ties to consumers through social media.

Every Tuesday, Redbox sends emails to more than 27 million renters informing them of the latest new releases, including 6 million of its most frequent renters. The company has more than 39 million unique consumer email addresses.

In October, Redbox announced its first national loyalty program — Redbox Play Pass. The points-based program allows customers to earn free movie rentals and rewards members on birthdays and anniversaries, in addition to other exclusives.

“We believe this program gained traction during the winter, when rental activity is typically high,” Pachter wrote in a March 30 note.

The analyst believes that despite a relatively flat year-over-year release schedule, his 2% projected uptick on kiosk revenue might be too conservative.

“Given the company's price increases, we believe that price elasticity of demand drove [rental] volumes down by 10% -15%, and think that Redbox may comp up in the high single digits,” Pachter wrote.
 

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