Redbox-Verizon Streaming Venture On Track For Second-Half Launch
A 34 percent surge in revenue at Coinstar in Q1 was driven primarily by growth in Redbox receipts, the company said late Thursday in its Q1 earnings call. Redbox revenue grew 39 percent to $502.9 million on increases in same store sales, new kiosk installations, strength of new releases and “consumer acceptance” of the 20-cent DVD rental price increase implemented last fall, the company said. Overall Coinstar revenues were $568.2 million in Q1, it said.
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Disc rentals of 196 million in the quarter were 10 percent above Q4, said CEO Paul Davis, and Redbox market share rose 7 percent over Q1 2011. Redbox is now in 30,000 locations with 37,000 kiosks, Davis said, a five-fold jump over the number the company operated at the end of 2007, he said. Unique credit card accounts were up 2 million sequentially in the quarter, and the number of unique email addresses attached to accounts spiked 49 percent from Q1 2011, he said. The company added 5,000 kiosks year over year and same-store sales were up 28 percent, it said.
Blu-ray content generated 8.7 percent of revenue in Q1, driven by title availability and an improved purchasing model to align purchases with expected demand, the company said. The company expects full-year percentage of Blu-ray revenue to be in the 8-9 percent range. Although all movies may come out with a Blu-ray component, “each don’t rent in the same way,” said Chief Financial Officer Scott Di Valerio, adding the company is “pleased with growth” in Blu-ray and believes it will grow as a percentage of sales.
Videogames performed as anticipated, accounting for roughly 5 percent of Redbox revenue in Q1, a typically slower season for game publishers, the company noted. Fifteen videogame titles released in Q1 across the three formats, compared with 21 in Q4 2011. The impact of fewer rentals was partially offset by a higher average check as the holding period ran just above 3 nights on average, the company said. The company refined video game purchasing and allocation to lower the percentage of video game content in the kiosks, which improved overall margins for the category, it said.
On Coinstar’s recently announced joint venture with Verizon for a video download and streaming service (CED Feb 7 p1), executives gave few details about execution plans other than to say the company has made the initial capital contribution. Verizon brings “an unrivaled network, terrific platform access to digital content” and 30 million consumers, Davis said. The venture is still on track for a second half 2012 rollout, he said.
Regarding its acquisition of NCR Blockbuster Express DVD kiosks, Coinstar has passed merger and acquisitions hurdles associated the Hart-Scott-Rodino Act and expects to close the deal by the end of Q2, Davis said. The company is still determining the number of kiosks it plans to install. Coinstar is buying all of the NCR-owned kiosks but not all of the retailer contracts, Davis said, “so that'll shrink down the number a little bit.” The company is weighing installation locations based on “where we can get returns in line with what we've seen with Redbox kiosks in the past,” he said. The change out of kiosks will occur over the next 12 months, he said.
Coinstar is “making progress” with expansion plans for Canada and the Redbox pilot there, Davis said. He said it was too early to commit to a target number of kiosks, pegging Canada as “one of the top three markets globally but a big step down from the U.S.” The company is still determining the right locations and pricing structure, he said.