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Redbox tries higher rental fees

Co. tests higher disc rental fees

Encouraged by Netflix’s price hike last month, Redbox is testing how consumers will react to higher rental fees at its kiosks.

The company has recently upped rental prices for DVDs at its boxes in Austin, Texas, and Portland, Ore., by as much as 20% to $1.15 and $1.20 per night. Blu-rays are still $1.50, videogames $2.

The fees are still lower than the $4-$5 charged for VOD and $2.99 for new DVDs at Blockbuster.

Redbox-parent Coinstar had already been testing price increases in several markets, including San Diego, Miami, Albuquerque, New Mexico; Spokane, Wash.; and Modesto, Calif., over the years, but the addition of markets signals a more permanent increase coming sooner than later. Analysts predict that price hikes could add around $26 million to Redbox’s bottom line.

Move comes as Redbox continues to attract new customers. During the second quarter, profits at Redbox rose 99% to $26.7 million, while revenue was up 34% to nearly $364 million during the last three months.

Coinstar execs are eager to lure customers who decide to leave Netflix, after its recent decision to up subscription fees by as much as 60%.

Nearly 20% of Netflix’s customers also rent from Redbox, while 30% of Redbox’s customers also use Netflix, Coinstar CEO Paul Davis said in its recent quarterly report.

Hollywood is keeping its eye on any shift Redbox’s way.

Lionsgate said it will continue its five-year $158 million distribution pact to provide its DVDs and Blu-rays through Redbox, after having the option to opt out of the deal by Aug. 31. Sony and Paramount also have an option to opt out of their current deals by January. Redbox agrees to hold off on offering titles from Warner Bros., Universal and Fox until 28 days after their discs bow in stores.

Until it lures more customers, and while it tests the higher pricing, Redbox has been expanding its offerings, primarily by stocking more Blu-rays and videogames.

This month, Redbox added 5,000 more games to its boxes. Company started renting videogames in 2009, and expanded it to 21,000 kiosks in June. Games are now available in 27,000 of its boxes nationwide. Game rentals are expected to account for as much as 8% of Redbox earnings by the end of the year.

“Whether customers are playing a new game or genre, trying a game before they buy it or simply entertaining friends and family, they’re embracing the availability of games at Redbox,” said Joel Resnik, VP of videogames for Redbox.Redbox has rented 4 million videogames and 1.5 million DVDs and Blu-rays to date.

Coinstar is still looking for an exec to head up Redbox after Mitch Lowe resigned from the top post to pursue other entrepreneurial interests.

Redbox owns and operates approximately 33,000 rental kiosks around the country.

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