Redbox increases rental price to $1.20

Kiosk operator will enforce hike on Monday

Redbox is no longer renting movies for $1 a day.

The kiosk operator, owned by Coinstar, said it will increase prices by 20% to $1.20 for each DVD starting Monday. Prices for Blu-ray discs and videogame rentals will remain the same at $1.50 and $2, respectively, for now.

Move marks the first time Redbox has changed the price of its DVDs in eight years. Blockbuster’s kiosks still charge $1 a day.

Redbox said it was forced to raise prices “primarily due to the increase in operating expenses, including the recent increase in debit card interchange fees as a result of the Durbin Amendment,” Coinstar CEO Paul Davis said in a statement.

Those operating expenses will include costs to launch a streaming service, expected to bow before the end of 2011, Redbox officials said. Plan has been in the works for more than a year.

News of the price hike comes as Coinstar announced a 90% boost in profits of $37.1 million during the September quarter and a 22% rise in revenue of $465.6 million. Redbox generates 84% of Coinstar’s revenue, and Redbox earned $390 million during the period, up 28%. Much of the boost was attributed to customers fleeing Netflix’s 60% price hike.

Company said Paramount has extended a deal to provide Redbox’s kiosks with discs through 2014, in exchange for 100,000 shares in Coinstar, should the studio decide to run the deal through 2015. A deal with Sony runs through Sept. 2012, while Lionsgate’s Redbox pact ends in August 2014.Still, the news didn’t sit well with Wall Street. On a day when the stock market was up, Coinstar’s stock fell $6.58 in trading after the market close, when Redbox’s new pricing strategy was announced. That was after the stock already dipped $1.25 to close at $52.95.

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