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When Redbox parent company Coinstar put up some underwhelming numbers for the second quarter, investors punished the company’s stock and there was some definite concern about the company’s long-term prospects. Worry not, says Wedbush Morgan analyst Michael Pachter, who considers Coinstar’s Q2 numbers to be a just a blip, rather than a harbinger of things to come.

Said Pachter:

“Although operating margin did suffer in Q2, we expect it to increase in the long-term as the company’s distribution agreements allow Redbox to purchase more copies at lower prices . . . Despite the lower comp, we think that Redbox’s demise has been greatly exaggerated.”

Redbox’s recent distribution agreements will result in substantially lower average cost of new DVDs for the kiosk renter, says Pachter:

“We estimate that the all-in cost of movies under these wholesale arrangements (net of the sale of previously-viewed merchandise) will be approximately $6 per disc lower [than what it was before the deals],”

Pachter also believes that an announcement of a major retail agreement with a large chain such as Target is in the offing, which would allow Redbox to pick up the pace of its expansion.

Merriman Curhan Ford analyst Eric Wold is also bullish (is he ever not?
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) on Redbox, pointing out that the company’s rental market share grew from 18% a year ago to 25.2%. Wold called the second quarter’s numbers an “anomaly”.
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Do these analysts have it right, Insiders? Will Redbox’s continued expansion and agreements with studios get the company’s financials back in line with investors’ expectations? Any predictions for Coinstar’s Q3 numbers now?

(via Home Media Magazine)

9 Responses to “Analyst: Redbox’s Demise Greatly Exaggerated”

  1. Member [Join Now]

    I think (or at least hope) that Redbox will be fine. People rent from these kiosks all the time.

  2. Member [Join Now]

    Redbox as well a Netflix have lost the “pzazz”
    with the public,
    when they used to offer NEW
    releases as soon as they came out,
    but now it is, “so what”;
    so what?
    yah, it is a big deal!
    Wake up Redbox!!!
    People want it NOW!!!

  3. Visitor [Join Now]
    Acy [visitor]

    I think some of the fault lies with Redbox. When they used to send the free rental code every Monday we used to get at-least 2 movies. one for adults and one for kids. Now that they don’t have that any more we haven’t used red-box in over a yr. Another thing that is not good for red-box is that local libraries have dvd to check out also. Our little town has current dvd/blu ray we can check out before we can even get them at Wal-mart. Why would people spend money even if just a dollar when they can have same thing for free for 10 days? I understand not every library has dvd check out yet but it’s coming. If red-box doesn’t do something to bring back customers then yes they will be obsolete.

    • Visitor [Join Now]
      Farva [visitor]

      And what number do you find yourself on the waiting list for new releases? 56 out of 84?

    • Visitor [Join Now]
      jen [visitor]

      At my library (NE OHIO) the waiting list for new releases in the hundreds (like 897). If its actually a good movie like Shutter Island etc its in the thousands. We can wait months to see it. Wish Red Box would expand more, the closest one is 10 miles away!

  4. Visitor [Join Now]
    vidor [visitor]

    the free codes aren’t coming from Redbox. but from RedboxINSIDER