This Thursday will be a huge day for both friends and foes of Redbox. The kiosk operator’s parent company, Coinstar, will be releasing its eagerly awaited fourth quarter results, and proponents and opponents are sure to be watching closely. Redbox spent the final three months of 2009 dealing with myriad challenges, and the financial results are expected to paint a picture of how well or poorly the company is dealing with said obstacles.
Several industry analysts have expressed cautions optimism regarding Redbox’s upcoming financial results. Merriman Curhan Ford analyst Eric Wold, who tends to make Redbox prognostications through rose-colored glasses, had the following to say about the pending results:
“Should Redbox surpass revenue expectations and guidance of $218 million to $238 million (after posting somewhat disappointing revenues in 3Q), we believe this would address any revenue concerns,”
Regarding the embargo by three studios forcing Redbox to buy titles at retail, Wold said the following:
“If [pre-tax earnings] margins come in the range of 15% to 17% (which has been the pre-tax range over the previous four quarters when only one studio workaround was in place), we believe this would help address any [pre-tax earnings] concerns,”
D.A. Davidson & Co. analyst John Kraft anticipates $225.5 million in rental revenue for Redbox, as well as an increase in the size of the force the company has out on new release street dates making purchases at retail stores. Said Kraft:
“We have seen … a significant increase in job postings on the company’s Web site,”
Wedbush Morgan Securities analyst Michael Pachter has revised his quarterly revenue estimate down to $317 million from $333 million and has doubts about Redbox’s workaround program, especially with the recent restrictions put in place by several retailers. Said Pachter:
“We expect the new limit of five new-release DVDs per customer imposed by Wal-Mart and Target could drive up inventory costs further,”
Pachter feels that while Redbox will notice some benefit from the mass closures of Blockbuster and Movie Gallery locations, the kiosk operator likely needs to increase its prices to offset higher inventory costs.
Which way is it going to go on Thursday, Insiders? Who’s going to be vindicated and who’s going to be deflated? Give us your insights and predictions in the comments.
(via Home Media Magazine)
I suspect that the gross revenue increase should still be a strong number since they are continuing to roll out machines and even with the reduced availability of New Releases people are still likely to rent something if they’ve made the trip to the Redbox.
The real number to watch is the Cost Of Goods. Redbox runs on such tight margins that the workaround should be causing these to rise a fair bit and push the net income into the red.
Sadly, Coinstar reports as a whole company and has a tendency to hide their negative numbers under the revenue streams of their other ventures.
Hopefully the analysts will ask the right questions and get real answers this time around.
From Lions Gate. Sadly other studios are missing the boat…
“Last year we made a call that went against the grain on RedBox and its working for our product. Gamer was our second theatrical title under the RedBox deal and like Crank 2, it worked everywhere. We projected to convert it 145% of box, it rented well at RedBox with no discernible impact on sell through and it performed well at other rental outlets. It was also our first title to go day-and-date on VOD concurrent with its DVD release. Gamer VOD revenue is expected to convert at close to 20% box.
Two years ago our VOD title converted under 4% about in last year at around 8% to 10%. In other words VOD revenues on Gamer will be about $3 million higher than they would have been two years ago and we believe this is largely incremental revenue. And we expect to see other innovative and accretive windowing of products responsive to our consumers’ taste and preferences later this year.”
http://seekingalpha.com/article/187857-lions-gate-entertainment-corp-f3q10-qtr-end-12-31-09-earnings-call-transcript?page=-1
Nothing has changed. They’ve clipped a billion in revs with partial studio support. They will reach $2 billion with or without studio support. Get used to it.
Thanks for sharing, i need some time to think about this. Can’t wait to see what you write about. Go for it!
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Clearly the market is betting revenues will be strong and margins will be thin. Ultimately, the market needs to value this enterprise not on the current cash flow but on future value of a recurring customer.
This company has the opportunity to offer an “all-you-can-eat” Netflix like plan. Since Netflix won’t carry new releases for 28 days after release, Redbox has the opportunity to fill that gap.
Also, as postage rates go up, Netflix will have to raise prices. That will allow Redbox to also raise prices. The key is the margins will be able to dramatically expand.
I also suspect Redbox’s revenue will increase. Renting DVD’s through kiosks is an idea whose time has come. Because I have rented VHS tapes, then DVD’s, first through a B&M rental store and then via mail through Blockbuster then Netflix, I still can’t believe they’re doing it.
If you’re working in a B&M rental store, it must feel strange being replaced by a kiosk box, red or blue. For owners of B&M rental stores, it must be frustrating being hit first by online DVD rentals, then by online streaming, now by kiosks (especially when the Redbox rental is FREE!!!!). Kiosks will be the final nail which drives small independent B&M rental stores out of business. Online rentals and kiosks have already greatly reduced the number of Blockbuster and Hollywood video B&M’s.