Most Redbox Kiosks to Have Blu-ray By Late Q3, Parent Coinstar Says

Coinstar plans to complete the rollout of Blu-ray discs to most Redbox kiosks by Sept. 30, CEO Paul Davis said on a Thursday earnings call. The company just started the rollout “to over 13,300” of its 23,000 Redbox kiosks, he said. The company is charging $1.50 plus tax per night for each Blu-ray title. That’s 50 cents more than it charges for DVDs. It decided to add Blu-ray discs now because of the significantly increased number of U.S. households that now own a Blu-ray player, Davis said.

The Blu-ray rollout plan was announced at the same time that Coinstar reported stronger results for Q2 ended June 30 than it did in Q2 last year. Profit grew to $13.4 million, 41 cents per share, from $7 million, 23 cents. Revenue jumped 34.9 percent to $342.4 million, due partly to growth in DVD revenue, which increased 43.9 percent to $271.9 million, Coinstar said. But the company’s shares fell Friday after it gave a forecast weaker than analysts’ estimates.

The company grew its rental market share to 25.2 percent in Q2, an increase of 7.2 percentage points versus Q2 last year, Davis said. In the process, Redbox extended its lead over U.S. brick-and-mortar rental chains that he said saw their collective share fall by 8.6 percentage points to 23.9 percent.

Redbox customers rented more than 123 million DVDs from it in Q2, Davis said. The company added 2,100 kiosks, ending Q2 with about 26,000 at its 23,000 locations, he said. It also added more than 400 dual kiosks, ending Q2 with more than 2,800 dual kiosks, he said. The company has “multiple new accounts in the pipeline that we'll be announcing over the next few weeks,” Davis said.

Redbox is testing a quick return option in which one customer can return a DVD at the same time that another person browses for DVDs, potentially saving time spent on lines at a kiosk. It plans on expanding that “in the near future,” Davis said.

Various online marketing initiatives are “successfully increasing consumer interest” in the company, Davis said. At the end of Q2, as examples, it had more than 1.1 million Facebook fans and 2 million iPhone application downloads, he said. Online consumers are an “active and engaged audience” and the online initiatives are a “cost-effective way to expand our reach,” he said. The company is also “making great strides” with cross-promotions, he said. Davis cited a recent Pepsi cross-promotion that started in mid-May that he said had “driven a noticeable uptick in Redbox rentals and new customers."

Cash paid by Coinstar on capital expenditures for continuing operations in Q2 increased to $52.8 million from $38.3 million in Q2 last year, “primarily due to increased investment in Redbox DVD kiosks as well as investment in infrastructure,” the company said. For the fiscal year, it expects to report revenue of $1.425-$1.505 billion and earnings per share from continuing operations of $1.88-$2. For Q3, it expects to report sales of $370-$390 million and earnings per share from continuing operations of 46-52 cents.