Another day, another new angle in the Redbox vs. Hollywood saga. The latest comes to us from Eric Wold, an analyst with financial services firm Merriman Curhan Ford. Wold is quoted in an article by Home Media magazine discussing his take on the possible outcome of Redbox’s quarrel with several Hollywood studios.
In the article, Wold speculates that if Fox and Warner are successful in having the Redbox lawsuits dismissed, it would represent a “worst case scenario” for the kiosk vendor, and could cause investors to “question the kiosk movie rental operator’s business model and sustainability”. Wold went on to say, however, that he doubts the suits will be thrown out.
Wold also addressed the upcoming cutoff of street date content to Redbox from Warner and Fox:
“Wold said the two studios represented 33.7% and 28.4% of home video rental revenue in 2008 and in the first half of 2009, respectively. He said that would equate from $338 million to $401 million of Redbox’s total revenue ($1.19 billion) estimate for parent Coinstar Inc.’s DVD rental division in fiscal year 2010.”
Regarding Redbox being forced to acquire content from the two studios through retail channels, Wold had the following to say:
“Redbox acquiring Warner and Fox new release titles via retail channels would add between $1 and $2 per unit DVD cost, resulting in a $12 million to $25 million impact to fiscal year 2010 pre-tax earnings estimate of $292 million. . . Redbox has still been able to obtain the Universal DVDs and generate solid mid- to high-teens [pre-tax] margins over [the 2008-2009] period,”
These are some fascinating numbers Wold is using, though his source(s) for them is not mentioned. If they are accurate, buying Fox and Warner discs at retail, while still causing a significant sting, would likely not have the catastrophic impact on Redbox’s bottom line that some have feared (or hoped for).
To summarize: while admitting that anything is possible and Redbox isn’t out of the woods yet, Wold expressed cautious optimism in the company’s short- and long-term viability and reiterated his firm’s “buy” stance on Coinstar (Redbox’s parent company) stock.
Is he right, Insiders? Will Redbox absorb any and all punishment the studios can dish out and still come out swinging in the end? Get your commenting hats on and let us know what you think.
[via Home Media]