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Redbox Raises DVD Rates to $1.20

27 Oct, 2011 By: Chris Tribbey



Starting Oct. 31, Redbox DVD rentals will no longer be $1 a day, with the leading DVD rental retailer raising the price to $1.20, the company announced Oct. 27.

Blu-ray Disc rentals will remain $1.50, while video game rentals will stay at $2 a day.



”We remain committed to providing Redbox consumers access to the latest movies at an incredible value. This marks the first price increase for a Redbox standard definition DVD rental in eight years,” said Paul Davis, CEO of Redbox parent Coinstar. “The change is primarily due to the increase in operating expenses, including the recent increase in debit card interchange fees as a result of the Durbin Amendment.”



That amendment enables the Federal Reserve to regulate debit card interchange fees.

 The announcement came as Coinstar announced its third quarter financial results, which saw Redbox pass $1 billion in revenues for the year to date.Starting Oct. 31, Redbox DVD rentals will no longer be $1 a day, with the leading DVD rental retailer raising the price to $1.20, the company announced Oct. 27.

Blu-ray Disc rentals will remain $1.50, while video game rentals will stay at $2 a day.

“We remain committed to providing Redbox consumers access to the latest movies at an incredible value. This marks the first price increase for a Redbox standard definition DVD rental in eight years,” said Paul Davis, CEO of Redbox parent Coinstar. “The change is primarily due to the increase in operating expenses, including the recent increase in debit card interchange fees as a result of the Durbin Amendment.”

That amendment enables the Federal Reserve to regulate debit card interchange fees. Coinstar estimates that those fees will cost it an additional $10 million and $14 million during the fourth quarter.

“We didn’t make the decision lightly,” Davis added.

The announcement came as Coinstar announced its third-quarter financial results, which saw Redbox pass $1 billion in revenue for the year to date, and saw Redbox become the overall leader in DVD rentals, with a 34.7% market share, compared with 24.4% in the third quarter of 2010.

“It has been a busy couple of months,” Davis said during an analyst call discussing the results, noting that all its agreements with studios had been solidified.

Revenue for the quarter was $455.6 million, a growth of 22.5% year over year, and profit was up to $37.1 million, compared with $21.4 million during the same quarter in 2010.

How much of that profit was from defecting Netflix customers was hard to tell, Coinstar executives said. Netflix raised its rates and attempted to split its DVD and streaming business, before aborting the plan.

“It’s difficult to know with precision the exact number,” Davis said of how much it benefited from Netflix’s moves. He did note that during the quarter Redbox saw 36 million unique credit and debit card users, up 8% quarter to quarter, and up 21% year over year. There were more than 33 million unique emails used at Redbox kiosks, a 60% jump year over year.

Titles delayed 28 days represented two-thirds of the DVDs in kiosks during the quarter, and 7% of all discs in kiosks during the quarter were Blu-ray, the company said. Davis addressed the recent reports that studios are exploring a 60-day rental window, saying Redbox would “protect the windows we enjoy today.”

Redbox still hasn’t announced a digital strategy or partner.

“We’ve made a lot of progress on the digital front,” Davis said. “It’s a very high priority for us.”

For the fourth quarter Coinstar is expecting revenue between $485 million and $510 million and earnings per share between 57 cents and 67 cents.
 



About the Author: Chris Tribbey


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