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Redbox Testing Multiple Price Points

31 Oct, 2014 By: Erik Gruenwedel

Redbox continues to test up to three price points in 11 markets nationwide in an effort to safeguard against projected flat rental growth due to box office uncertainty and other issues, Scott Di Valario, CEO of parent Outerwall, told analysts on the company's Oct. 30 fiscal call.

Redbox operates almost 36,000 kiosks nationwide and has rented more than 3.7 billion discs.

Di Valerio said the pricing tests — started in August at undisclosed locations — have been closely monitored. Redbox last tested pricing in 2011, which resulted in a 20% hike nationwide to $1.20 for DVDs, $1.50 for Blu-ray Disc.

“We're continuing to monitor the results and we'll make a determination, if and when to put a price increase in place, “ Di Valerio said. “From a financial perspective, [any] price increase … would help to offset the expected declines in the market.”

B. Riley & Co. analyst Eric Wold said some of the test locations include Portland, Ore., for $1.35 for DVD, $1.50 for Blu-ray; Cincinnati, Ohio: $1.35 for DVD, $1.50 for Blu-ray; Reno, Nev.,: $1.35 for DVD, $1.75 for Blu-ray; Colorado Springs, Colo.: $1.35 for DVD, $1.75 for Blu-ray; Salt Lake City, Utah: $1.50 for DVD, $2 for Blu-ray; and Albuquerque, N.M.: $1.50 for DVD, $2 for Blu-ray.

Maryland kiosks currently rent Blu-ray titles for $1.59 and video games for $2.12 nightly, respectively.

Wold said he agrees with Redbox’s desire to increase prices to offset the secular decline in disc rentals and expected margin pressures on the horizon. He also believes any price increase benefit would be short-lived and could actually drive more detrimental longer-term consumer usage shifts — notably toward competing digital formats.

“We have no doubt they will look to implement a price increase as they have to … it’s how much of that sticks and the long-term impact to their customers that’s the question,” Wold wrote in an email.

About the Author: Erik Gruenwedel

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