Redbox unveils online strategy
Published 5:00 am Friday, October 29, 2010
LOS ANGELES — As more consumers leave DVDs behind for digital downloads, the company that brought movie vending machines to grocery stores nationwide is following the audience.
Redbox unveiled a new digital strategy on Thursday that by next year will expand the number of movies offered to consumers directly in their homes — a move the Illinois-based company hopes will set the stage for longer-term growth and soothe investors anxious about its prospects.
The company is in talks with several potential partners for this expansion, which will include a Web-based service that works in conjunction with its $1-per-night movie kiosks, said Chief Executive Mitch Lowe.
“The disc business is still very strong and will continue to be for quite some time, but we need to get into this space to take advantage of the gradual transition to digital,” Lowe said.
The news came on the same day that Redbox’s parent company, Coinstar Inc., released its financial results for the third quarter ending Sept. 30.
The largest contributor to Coinstar’s overall performance was continued strong growth for Redbox, which has risen from practically nowhere in 2006 to become one of the two largest rental companies alongside Netflix.
Revenue from DVDs grew 54 percent from the previous year to $305.5 million, while operating income rose 149 percent to $29.7 million. Although some of the improved financial results came from the growing number of kiosks, which now total 28,900, existing kiosks saw their revenue grow 17 percent on average.
Redbox’s growth is slowing, however, as it is having a tougher time finding new locations to install kiosks.
Those market pressures make it appealing for Redbox to go online and reach more consumers, particularly a younger crowd that prefers to access movies with Web-connected devices. A digital service will also allow Redbox to expand its film catalog: Kiosks typically contain about 600 DVDs, most of which are new releases.
Redbox officials declined to discuss how much it would charge consumers for the online service, saying the company had yet to finalize its pricing plans. But Redbox could find it difficult to maintain the $1-per-night price of its kiosks, which have lured consumers and built the core of its business.