When Redbox announced last week that it had cut 28-day new release delay deals with its erstwhile enemies, Fox and Universal, consumers and investors alike wondered what the ramifications would be to Redbox’s business. Would the customers keep coming? What about Coinstar’s share price? Now that the dust has settled a bit, CNN Money has run a story chronicling Redbox’s troubles with the former Hollywood Three in which several analysts offer their opinions on the matter.
Steve Frankel, an analyst with Brigantine Advisors, believes that though it may lose a few new release-seeking customers, Redbox should do fine under the new delays. Opined Frankel:
“The price and convenience of Redbox is still attractive to consumers . . . Netflix also has a 28-day wait, but while 70% of Netflix’s demand is for older titles, 100% of Redbox’s demand is for new titles. Some of the savvier Redbox customers are going to be disappointed.”
According to the story, another reason that Redbox may not shed too many renters is the fact that “many customers aren’t aware of when DVDs are released, and 60% of Redbox’s titles will still be available the same day that they are available for purchase or rent at Blockbuster”.
Regarding Redbox parent Coinstar’s share price in the fallout from the deals, Craig-Hallum Capital analyst Robert Evans says that it will take time to reveal the full impact of the agreements on Redbox’s bottom line. Said Evans:
“The stock will trend positive in the near term, since the lack of clarity on the supply of DVDs was a great overhang . . . But we’ll need to see the impact of the 28-day delay in the next couple quarters to tell where the stock is ultimately going to go.”
Your turn, Insiders. Will these deals ultimately pay off for Redbox, or are they short-sighted moves that will come back to haunt the company (along with its customers and investors)?
(via CNN Money)