High viewership of the Summer Olympic games and weeks of very low new content availability have contributed to the sluggish third-quarter earnings as reported by Redbox's parent company Coinstar yesterday.
Coinstar reported that its Q3 net income was $36.8 million, or $1.14 per share, down from the $37.1 million or $1.18 per share from the third quarter of 2011.
It reported revenue growth of about 18 percent to $459.5 million, which also included the addition of NCR kiosks to its portfolio. Removing the NCR acquisition drops the revenue results to a growth of 14.2 percent to $445.1 million. Redbox said it gained share in the physical DVD rental market, up 9.4 percent to 44.1 percent when compared with Q3 last year.
Coinstar said there were 23 percent fewer new theatrical titles in the summer months, however, leading to 34 percent fewer product units going into kiosks during the period compared to last year. And only three of those pulled in more than $100 million in theaters: Safe House, The Hunger Games and The Lorax. The Olympics also impacted its rentals, but Coinstar said it wasn't alone, as the Summer Games depressed all video entertainment channels during the weeks that they took place.
"We went through nine weeks of very low content," said Coinstar CEO Paul Davis during Thursday's earnings call. "Our number of new credit cards grew but customers were not renting as much as they did in the past."
Coinstar also reported in its results that September typically has lower seasonality due to factors such as back-to-school, new fall TV programming, and the start of the professional and college football seasons.
Warner Bros. deal
In addition, Redbox and Verizon are moving closer to the launch of an online video streaming service to compete with the likes of Netflix. Warner Bros. agreed to a deal with Redbox Instant by Verizon that will give the new service access to content from its film library. That will include video-on-demand and electronic sell-through of its new release titles.
There were no final details of the launch, but Davis said in the earnings call that they are "getting content secure and making great progress."
Redbox and Warner Bros. also have signed a multi-year agreement to bring Warner Bros.' Blu-ray Disc and DVD titles to Redbox kiosks 28 days after their retail release dates.
Redbox announced plans to join the Digital Entertainment Content Ecosystem or DECE and has agreed to promote UltraViolet through a program of mutually agreed-upon promotions and marketing tactics designed to help retail customers discover UltraViolet, according to the report.
At the end of Q3 Redbox installations in Canada stood at 270, according to Coinstar's report. The rollout has gone somewhat slower than originally anticipated due to issues with site selection and permitting, and the lower number of installs impacted revenue in Q3. Coinstar expects to end 2012 with between 300 and 500 kiosks in place and consider the overall market opportunity in Canada to be in the range of 2,000 to 2,500 kiosks.
Davis said in the earnings call that Coinstar will remain focused on the expansion into Canada. For the U.S., he added, "It's not necessarily by adding thousands of more kiosks, but how can we get more out of the existing kiosks."
Read more about DVD kiosks.