Redbox Rentals 'Cannibalized' by Amazon, Apple, Analyst Says, as Parent Cuts Outlook
Despite a rental price hike last December and “managing inventory well,” Redbox “misjudged demand” in video rental business from its DVD kiosks, Wedbush Securities analyst Michael Pachter said Tuesday. The company's stock fell 24.1 percent Tuesday to $44.04. Redbox parent…
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Outerwall cut its outlook Monday amid a Redbox management change, the company said in an SEC 8-K filing. Amazon and Apple “have cannibalized a large portion of Redbox traffic from its convenience-oriented customers,” Pachter said. He expects Redbox core value-conscious customers to “remain loyal so long as there is a significant price differential between Redbox rentals and most on-demand offerings.” Outerwall attributed the lower guidance to heavier promotional spending and additional content purchases designed to “encourage consumers to return to normal rental patterns,” the filing said. Since content was already purchased, “there was less opportunity to offset the lower revenue,” it said. Redbox business continues to be challenged by “the historically low box office during the third quarter, which was the worst theatrical box office in Redbox kiosks in four years,” it said.