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Redbox Q4 Profit, Revenue Plummet

4 Feb, 2016 By: Erik Gruenwedel

Movie rental transactions drop 24%

Consumers’ increasing penchant for low-cost smorgasbord streaming significantly impacted the bottom line of nation’s largest disc rental service, Redox. The kiosk vendor Feb. 4 reported fourth-quarter operating income of $62.6 million, down 50% from operating income of $125.8 million in the previous-year period.

Income was impacted by an $8.5 million one-time payment to settle an outstanding purchase commitment with NCR Corp., which sold its Blockbuster Express business to Redbox four years ago for $100 million.

Revenue fell 17% to $407 million, from $490.7 million; the $83.7 million decrease reflects a 24.3% decline in movie rentals year-over-year.

Erik Prusch, CEO of Redox parent Outerwall, remained upbeat on the company’s major business unit despite achnowledging ongoing secular declines in the market.

“Redbox is a compelling business. We will manage the business for profitability and cash flow, and we will continue our focus on expense management, operational efficiencies and network optimization,” said Prusch, who is also president of Redbox.

Previous Redbox president, Mark Horak, was let go in December.

Segment operating margin was 15.4% compared with 25.6% in in the previous-year period. The lower margin was the result of higher content purchases and winter holiday promotions intended to bring consumers back to the kiosk after an extended period of weak content last year.

While Redbox generated 135.8 million rentals in the quarter, down about 25% from 179.5 million rentals year-over-year, revenue per rental increased nearly 10% to $2.98 from $2.73, due primarily to the price increase for movies and video games.

Unfortunately, surplus inventory undermined Horak's tenure, Wedbush Securities senior media analyst Michael Pachter said in December. Meanwhile, Prusch believes the kiosk disc rental business still has legs in a digital age.

“We are confident that millions of consumers will continue renting from Redbox for many years to come, as a majority of our customers use Redbox to complement digital alternatives. We fully intend to continue meeting the entertainment needs of our customers as we maintain our focus on providing value for all of our stakeholders.”

About the Author: Erik Gruenwedel

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