Friday announcement sends stock price down
Last week’s announcement by Redbox’s parent that it would miss its fourth-quarter earnings forecast, causing its stock to lose more than a quarter of its value, could portend deeper troubles ahead for the once high-flying DVD kiosk service.
After the market close on Thursday, Coinstar said it would miss its 2010 fourth-quarter numbers, and lowered its guidance for 2011, blaming sluggish Blu-ray rentals and the impact from a 28-day window implemented by some studios on Redbox DVD rentals.
CEO Paul Davis said year-over-year revenues for the period would still grow 31% to $391 million, but that is well below earlier guidance for revenues of up to $440 million. In trading on Friday, Coinstar’s shares plummeted 27% to around $41.
Some suggested Redbox’s woes go beyond the 28-day windows stipulated by Warner Bros., Fox and Universal studios. (Time Warner CEO Jeff Bewkes has even said his company is considering extending the window period to 60 days).
BTIG analyst Rich Greenfield said he believes Redbox is being hurt by increased competition from Netflix and from a new marketing push by Blockbuster, which receives new DVD titles before Redbox in most cases. If Disney were to implement a window on Redbox, Greenfield said, it would be a tipping point for the buck-a-night retail service. Coinstar is expected to report fourth-quarter and full-year earnings Feb. 3.