Coinstar’s Redbox To Deploy Blu-ray Titles Across its Kiosks by July

Coinstar’s Redbox will expand Blu-ray rentals across its kiosks by July as it upgrades software to enable variable pricing, CEO Paul Davis said Thursday at the Wedbush Morgan conference in New York. Many of details of the Blu-ray program haven’t been finalized, including pricing and assortment, Coinstar officials said. But Blu-ray titles will be carry a 30 to 40 percent premium to standard DVDs, which rent for $1 per day. Redbox has tested variable pricing with standard DVDs, with some renting for $1.50 per day, while others go for $2 with $1 charged each additional day, Davis said.

A standard Redbox kiosk has 635 slots for 200 titles, Chief Financial Officer Scott Di Valerio said. Blu-ray titles will be about 10 to 15 percent of the mix and may replace slower moving standard DVDs, Davis said. Redbox had about 22,400 kiosks as of Dec. 31 installed at Kroger, 7-Eleven, Walgreen’s, Wal-Mart and others. Another 7,000 to 8,000 are expected to come on line in 2010, including 3,000 in Q1, Di Valerio said. Flextronics builds the kiosks for Redbox, he said. About 39 percent of Redbox kiosks are in grocery stores, while 18 percent are in mass merchants, Davis said. Redbox had a 16.8 percent share of DVD retail market on Dec. 31, up from 9 percent a year earlier, he said.

With the recent agreement with Warner Home Video, Redbox secured 90 percent of the product it needs for the year, Davis said. Redbox, which filed an antitrust suit against 20th Century Fox, Universal Studios Home Entertainment and Warner, agreed to license minimum quantities from Warner. It also agreed to pay Warner $124 million as part of revenue-sharing pact that ends Jan. 31, 2012. Redbox also is barred from renting new titles until 28 days after their release. It’s required to “destroy” about 50 percent of titles that it’s finished renting and can resell the rest, company officials said. Suits remain pending against Universal and Fox. Redbox has three- to five-year contracts with retailers, the first of which expires in 2011, Davis said.

In addition to Blu-ray, Redbox tested digital video downloads using Sonic Solutions’ CinemaNow platform, but hasn’t decided whether it will move forward, Davis said. If Redbox launches a service, it will likely involve downloads to a PC or TV, Davis said. While Redbox has considered retrofitting its kiosks to offer digital downloads to a USB drive, it has no immediate plans to do so, Davis said. To get into the download business, Redbox will partner with a company like Sonic Solutions that already has contracts to sell digital video rather than negotiate its own agreements with movie studios, Davis said.

Redbox also is continuing to test videogames rentals at 250 kiosks in Reno, Nev., and Wilmington, N.C., Davis said. It has tried both videogames-only kiosks and those mixed with DVDs where games accounted for 10 to 15 percent of the assortment, company officials said. The games, including Electronic Arts, THQ, Activision Blizzard Xbox 360 and Wii titles, carry a $2 daily rental fee due largely to their $50-$60 cost, Davis said. Davis declined to disclose the DVD costs. Redbox typically gets 15 “turns” with DVDs with an average rental of $2 for two nights, Davis said. Davis declined to comment on the impact of the closing of Blockbuster and Movie Gallery stores on Redbox kiosks. But Redbox typically has three to four kiosks within five minutes of a Blockbuster store and 75 percent of its customers previously rented from a store, Davis said.

Wedbush Morgan Conference Notebook …

DirecTV will ship MoCA-equipped H24 thin client and HR24 DVR/satellite receivers by month’s end as it adds multi-room service, Entropic Chief Financial Officer David Lyle said. The HR24 is a non-TiVo DVR product and is expected to have at least three tuners. DirecTV is expected to field a TiVo DVR/satellite receiver later this year. Entropic is supplying its EN2210 MoCA chips for the DirecTV receivers. The chips sell for $8 to $9 in volume, analysts said. The MoCA ICs also will be deployed in an ethernet-to-coax bridge dongles that DirecTV will deploy to make its existing base of HD receivers compatible with the technology, Lyle said. A DirecTV spokesman confirmed the MoCA-based receivers will ship in the spring, but declined further comment. Entropic also is marketing the EN2510 MoCA 1.1-compliant chip that increases processor speed to 166 MHZ from 150 MHZ. The EN2510, which is being made by Taiwan Semiconductor Manufacturing Corp. using a 65-nanometer process, sells for $5 to $7 in volume, analysts said. While EchoStar is a member of the MoCA alliance, it hasn’t deployed the technology. Entropic hopes there will be an “opportunity” to deploy MoCA with EchoStar in the second half, Lyle said. EchoStar has been using Entropic’s band translation switches since 2008. The switches can support two tuners over a single cable. Meanwhile, the finalization of the MoCA 2.0 spec slipped into Q2 from Q1, Lyle said. MoCA 2.0, which boosts throughput to 400 Mbps from 175 Mbps, will arrive in products in late 2011, Entropic officials have said (CED Feb 23 p1). With the arrival of the new spec, Entropic is expected to face new competition from Broadcom, which is integrating MoCA with its MPEG chips, industry officials said. Broadcom will likely grab a 10 to 15 percent of the MoCA chip market this year, increasing to 30 to 35 percent in 2011, Lyle said. Entropic will have the remaining share, he said. Entropic supplies all MoCA chips in Cisco’s Scientific-Atlanta set-top boxes and will likely share space with Broadcom at Motorola, Lyle said. Comcast, Cox and Time Warner Cable are expected to introduce MoCA later this year. Verizon has deployed it in 2.8 million FiOS STBs, analysts have said.