Redbox said it will be increasing the price of renting standard DVDs by 20 percent beginning Monday from its machines. The announcement came via a press release that disclosed strong earnings and revenue for the DVD kiosks parent company, Coinstar, but investors didn’t seem happy. In after-hours trading, Coinstar shares were sinking more than 12 percent after dropping 2 percent to $52.95 during the regular session.
Investors might be selling shares because they remember that when Netflix raised their prices it lost 800,000 subscribers and its stock tanked.
Coinstar CEO Paul Davis said the new price, $1.20 a day for DVD rentals, up from $1 previously. It reflects costs associated with rising operating expenses, including government mandates brought about by the so-called Durbin Amendment that was supposed to benefit consumers through lower debit-card fees.
Redbox said prices for Blu-ray movies and video games will remain at $1.50 and $2 per day, respectively.
“This marks the first price increase for a Redbox standard definition DVD rental in eight years,” Davis said. “The change is primarily due to the increase in operating expenses, including the recent increase in debit card interchange fees as a result of the Durbin Amendment.”
Coinstar said Thursday its profit in the third quarter soared 90 percent to $37 million on revenue that rose 23 percent to $466 million. On a per-share basis, Coinstar earned $1.18, way past the 88 cents Wall Street was expecting. Coinstar ended the quarter with 34,400 Redbox DVD kiosks and 19,500 coin-counting kiosks. Redbox accounted for $390 million in revenue in the quarter while the coin business accounted for $76 million.
Redbox Automated Retail LLC was initially funded by McDonald’s Corp. In 2002, the company placed four automated convenience store kiosks, that sold grocery items such as milk, eggs, and sandwiches, and 11 DVD rental kiosks in Washington Metropolitan Area locations. While Redbox withdrew the grocery kiosks within a year, the DVD-rental kiosks it had also installed in the area succeeded, and the company changed its focus to that market.
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