Redbox Now Controls More than 50%

'Jack Reacher,' 'Django Unchained,' 'Life of Pi,' 'Silver Linings Playbook' among top rented titles for Redbox during record second quarter

As Netflix evolves into more of a streaming video platform, and Dish Network shuttering more Blockbuster stores, Redbox is enjoying the benefits, seeing its share of the disc rental business grow to more than 50% for the first time.

Consumers rented 186.7 million discs from Redbox during the quarter, company parent Outerwall said. Redbox operates around 43,700 kiosks. Its marketshare rose 7% to nearly 50% during the first quarter, and surpassed that over the last three months.

The most rented Blu-ray titles during the period were “Jack Reacher,” “Django Unchained,” “Life of Pi,” “Silver Linings Playbook,” “Hansel and Gretel: Witch Hunters,” “Oz the Great and Powerful,” and “Snitch.” “The Hobbit,” “Les Miserables,” “Gangster Squad,” “Red Dawn” and “Mama” performed weaker than expected, the company said.

Still June ended up being the third-highest rental month in the company’s history, trailing December 2012 and March 2013, according to Outerwall CEO J. Scott Di Valerio. Redbox reps around 85% of the Bellevue, Wash.-based company’s revenue.

During the second quarter, Redbox redesigned more than 20,000 of its kiosks to carry at least 80 more discs in each box as a way to increase inventory. The units used to have 630 slots and now hold more than 700 discs. Company also has been reorganizing its kiosk network, selling several thousand boxes that NCR operated.

The expansion of the boxes helped Redbox grow rentals by 3.7% during the second quarter, compared to the previous year. They were flat during the first quarter.

Redbox attributed the growth to a 74.3% surge in Blu-ray disc rentals. Redbox also said the rentals of videogames also increased 40% as it expands into that area.

That helped profits rise 27% to $46.9 million and revenue increase 4.1% to $554.2 million.

The company earned on average $2.56 per rental, and saw more one-night rentals than usual, resulting in lower than expected net revenue during the quarter.

Analysts believe Redbox was helped in part by rival Netflix losing 470,000 subscribers to its DVD-by-mail business during the same quarter. While kiosk-based rentals are up 1% to 39% during the first six months of the year, subscription-based DVD-by-mail order services accounted for 22% of the overall DVD rental market during the same period (a decline of 26%), according to NPD Group.

Still while activity at its kiosks is up, Redbox still wants to grab a bigger share of Netflix’s streaming stronghold.

Outerwall, which purchased former Redbox parent Coinstar in 2008, owns 35% of Redbox Instant by Verizon. That streaming service is expected to see more growth by adding apps to videogame consoles later this fall and Roku, and benefit from the homevideo releases of tentpole titles that bowed this summer.

Redbox Instant currently offers unlimited access to 5,000 titles and four disc rentals. Service was introduced at the Consumer Electronics Assn confab in Las Vegas in January, and launched in March, the end of Netflix’s first quarter.

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