Editorial

Redbox: Tough Times Ahead

By Variety | Tuesday, September 23, 2014

An analyst tracking Outerwall, parent company of Redbox, rang the alarm on the DVD-kiosk service Monday citing a fleet of studio deals all set to expire in the next seven months.

Eric Wold, analyst with B. Riley & Co., raised the prospect that Redbox would not only see studio pressure seeking higher prices per disc, but “a strong possibility that one or more actually chooses to start/extend delays or cease supplying discs to Redbox altogether.”

The first to expire of Redbox’s studio deals–Lionsgate–Wold claims already elapsed, raising the specter that the kiosk company could be on the verge of a fresh round of negotiation difficulties that have been a source of disruption in the past.

Wold, who downgraded Outerwall from neutral to sell, also knocked Redbox for contradicting management’s previously professed indications that it would curb free giveaways crimping the company’s revenues, as well as anticipation that any rental price hikes would not go over well with customers.

Michael Olson of Piper Jaffray & Co., issued a survey of Redbox users Monday that offered a rosier picture of the business’ prospects. Seventy-seven percent said they anticipate using Redbox a similar amount or more in the next year vs. 23% who anticipate reducing their usage. In addition, he determined that the rise of streaming content options seemingly in competition with Redbox were not cannibalizing the service.

Outerwall stock slid 4.6% Monday, closing at $55.80.