Analyst: DVD Purchase Limitations Affect 40% of Redbox's Titles27 Jan, 2010 By: Erik Gruenwedel
New quantity limits imposed by Wal-Mart and Target on the purchase of new-release DVD movies affect 40% of rental kiosk offerings, including market leader Redbox, according to an analyst.
Wal-Mart spokesperson Melissa O’Brien Jan. 27 confirmed the world’s largest retailer had imposed single purchase limits on new-release DVD movies to five copies for the first 28 days of the title’s release.
The 28 days is the identical time period Warner Home Video imposed earlier this month on Netflix for all new releases.
While the restrictions would appear to mark another step by studios to impose a sellthrough window on packaged media, including Blu-ray Disc, O’Brien would not confirm.
“From time to time, we have placed purchase limits on products at stores so that they can be accessible and available to as many customers as possible,” O’Brien said.
After Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment imposed delays from 28 days on new-release DVDs to kiosks, Redbox sued the studios and then implemented so-called workaround programs, purchasing the studios’ titles from retail vendors such as Wal-Mart and Target.
With Target apparently limiting quantity purchases on new-release DVDs to the first week of release, Eric Wold, analyst with Merriman Curhan Ford, said investors will be focused on fourth quarter results for Coinstar, parent of Redbox, including any “commentary or body language” from executives regarding their outlook for 2010 and how the company is dealing with the issues.
“We remain confident that the normal maturation of the installed Redbox kiosk base (with ramping revenues and margins) will help offset any potential impacts from the workaround programs,” Wold wrote in a note.
Separately, Ralph Schackart, analyst with William Blair & Co, said the purchase limitations would adversely affect smaller video stores that depend on Wal-Mart and Target for increased copy depth on new releases.
“This will be very tough for rental models that rely on retailers for physical purchases,” Schackart said.