Redbox Q2 revenue doubles on units
PHYSICAL:Same-store sales jump 33% from last year, parent says
By Danny King -- Video Business, 8/4/2009
AUG. 4 | PHYSICAL: Redbox's second-quarter sales more than doubled as the largest U.S. movie-rental kiosk operator added machines and boosted the amount of sales it gets from each kiosk, The unit's results helped parent company Coinstar double its earnings from a year earlier.
Coinstar's second-quarter sales from Redbox and the far-smaller DVDXpress brands jumped to $188.9 million from $90 million a year earlier as Coinstar expanded its DVD kiosk count by 86% to 17,900 units while boosting its same-store sales by 33%, the company said in a statement today. Operating income from Coinstar's DVD division rose 61% to $31 million as the surge in sales offset the effects of lower DVD resale prices and higher marketing costs, Coinstar Chief Financial Officer John Harvey said on a conference call with analysts today.
Redbox has led growth in the U.S. kiosk industry, which is expected to expand over the next few years as video store chains such as Blockbuster and Movie Gallery close underperforming stores. U.S. rental revenue from kiosks are expected to more than double between last year and 2011 to $1 billion, while traditional in-store sales are expected to fall during the same period, Adams Media Research said in March. Redbox today boosted its 2008 sales forecast for its DVD operations to as much as $780 million, up 6% from its May forecast.
"There's tremendous demand from our retail partners, and we're doing everything we can to keep up with that demand," said Coinstar Chief Executive Officer Paul Davis on today's conference call. "There's no shortage of opportunities."
In April, ATM-making giant NCR agreed to acquire the majority stake in TNR Holdings, the No. 2 movie-rental kiosk operator, in an agreement that will speed up the kiosk-making partnership it began with Blockbuster last year and help accelerate the process of developing as many as 10,000 Blockbuster Express machines by next year.
Still, Redbox might gain market share within the kiosk market as the company said yesterday that it would boost the number of machines it has at No. 1 U.S. grocer Kroger to 2,600 from about 200 within a year. While some industry analysts and executives such as Netflix Chief Executive Officer Reed Hastings have said Redbox's $1 a night rentals and reselling of used discs may hurt the industry, Redbox, which has been locked in a legal tussle with Universal since last October, last month signed a five-year $460 million agreement to distribute Sony Pictures Home Entertainment titles and says it's negotiating to reach similar agreements with other studios.
In April, Coinstar promoted Redbox executives Gregg Kaplan and John Harvey to chief operating officer and chief financial officer, respectively, at the parent company, less than two months after the coin-exchange-machine maker agreed to buy the 49% of Redbox that it didn't already own for about $175 million in cash and stock. DVD kiosks accounted for 60% of Coinstar's second-quarter sales, up from 41% a year earlier.
As the company adds as many as 8,500 DVD kiosks this year, it will test different pricing models as well as Blu-ray rentals and videogame rentals, said Davis, who added today that Coinstar is considering strategic alternatives, including a possible sale, for its money-transfer and EPay divisions. About 75% of Coinster's capital expenditures this year will be for its DVD kiosks, Coinstar said today.
Overall, Coinstar's second-quarter net income doubled to $6.96 million, or 23¢ a share, from $2.68 million, or 9¢, a year earlier, as revenue jumped 43% to $314 million.
