Analyst: Redbox’s Gain, Blockbuster’s Pain

21 Jul, 2009 By: Erik Gruenwedel

With kiosk operator Redbox riding the swell of movie rental’s resurgence, Pali Captial analyst Stacey Widlitz July 21 said efforts by No. 1 DVD rental service Blockbuster to rollout branded kiosks via partner NCR (which also owns The New Release kiosk brand) might have little effect due to the former’s liquidity issues.

Redbox, which just inked a five-year $460 million distribution deal with Sony Pictures Home Entertainment, plans to have from 20,000 to 22,000 kiosks offering $1 per day rentals in operation by the end the year compared to about 10,000 Blockbuster Express kiosks.

Specifically, Widlitz said Dallas-based Blockbuster (due to more than $800 million in debt and the global credit crisis) is dependent on NCR to front much of the capital needed to install the Blockbuster Express kiosks.

Indeed, Blockbuster CEO Jim Keyes, in a recent analyst call, admitted the venerable chain was forced to limit inventory during the most recent quarter on new releases due to cash flow concerns.

“At the end of the day we do not see the Blockbuster kiosk strategy as a threat,” Widlitz said, in a note.

Blockbuster shares closed July 21 up 3 cents to 69 cents per share, which amounted to a 78% decline from a 52-week high of $3.19 per share.