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Redbox Sees Rental Market Share Pass 50%

25 Jul, 2013 By: Chris Tribbey

Redbox parent Outerwall (formerly Coinstar) reported a profit of $46.9 million on revenue of $554.2 million for the second quarter of 2013, while Redbox saw its share of the disc-rental market pass 50% for the first time ever.

Outerwall’s profit was up markedly from the $36.9 million the company earned during the same quarter in 2012.

Second-quarter rentals grew 3.7% year-over-year, compared with a flat first quarter, with growth driven by a 74.3% jump in Blu-ray Disc rentals, and a 40.4% jump in gaming rentals.

During the quarter, Outerwall sold several thousand former NCR kiosks through a wholly owned subsidiary generating a tax benefit of $17.8 million.

“In Q2 Redbox continued to focus on maximizing productivity through optimizing the kiosk network,” Outerwall CEO J. Scott Di Valerio said during a call with investors.

More than 20,000 kiosks were retrofitted during the quarter to hold 80 more discs.

Redbox installed approximately 220 gross new kiosks and removed approximately 550 kiosks, not including the final 300 NCR kiosks that were removed during the quarter. In Canada Redbox added 140 new kiosks, bringing the total there to nearly 500.

Total unique credit cards swiped at Redbox kiosks were up nearly 7% year-over-year, with consumers renting 186.7 million discs during the quarter.

Redbox revenue was $478.5 million, up 4.5% compared with the same quarter in 2012.

“We are encouraged by the rental growth in the quarter, but rental activity was below expectations due to weaker performance from several titles including The Hobbit, Les Miserables, Gangster Squad, Red Dawn and Mama,” Di Valerio said. “Despite these challenges, momentum built toward end of the quarter to help set up a stronger Q3, and June ended as the third-highest rental month in company history, trailing only December 2012 and March 2013.”

The only negative news the company shared was there were more one-night rentals than expected, resulting in lower than expected net revenue per rental (an average of $2.56), which translated into a $7.6 million hit on revenue for the quarter.

Top-performing Blu-ray titles for the quarter included Jack Reacher, Django Unchained, Life of Pi, Silver Linings Playbook, Hansel and Gretel: Witch Hunters, Oz the Great and Powerful, and Snitch.

Redbox Instant by Verizon saw “a steady increase in customer acquisition levels,” the company said, with the service announcing partnerships with Roku and Sony. New consumer electronic and gaming console partners are expected to be announced later this year.

“As we head into Q3, we expect the strong seasonality we experienced at the end of Q2 to continue through July and August, propelled by the steady stream of quality, diverse titles,” Di Valerio said. “At the same time, we have also factored in the unusually high number of large budget movies that the studios are releasing throughout the summer, which may compete for our consumers’ entertainment viewing.”

About the Author: Chris Tribbey

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