Redbox soars even after price increases
Shares of the DVD chain's parent company are jumping after surprise news of a hot quarter -- and Netflix investors seemed skittish on the news.
Shares of Coinstar rose more than 7% Friday after the company upped full-year guidance and said that its first quarter would be better than expected.
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A big surprise in the quarter was that Redbox's price increase in October went over better than expected. The company boosted its one-day DVD rental fee to $1.20 from $1. When it tested the increase, it saw demand slip, and Coinstar was prepared for that on a larger scale. But as it turned out, demand didn't falter as much as it expected.
That led Coinstar to bump up projections for first-quarter revenue to between $567 million and $569.2 million. It previously estimated revenue at between $530 million and $555 million. The company also said its earnings before taxes and other deductions would be between $127.9 million and $130.1 million -- a significant increase from previous estimates of between $94 million and $104 million. This is all preliminary; the company will report its quarterly results on April 26.
So what does all this mean for Netflix (NFLX), Coinstar's main rival in the DVD-rental business? It shows that Redbox's mild price increase was not enough to get people to jump ship. Netflix shares were down more than 1% Friday, but swung back to a slight afternoon gain.
Coinstar also reported good news in its ongoing spat with Warner Bros., the studio that tried to bully Redbox into not renting new movies until 60 days after they went on sale. Redbox would not agree to those terms, so Warner Bros. refused to sell its DVDs to Redbox. As a result, Redbox had to buy those DVDs through other means. Coinstar said this workaround was not as expensive as it had anticipated.
That bit of news is undoubtedly ruffling feathers at movie studios. Hollywood is worried that the low-priced rental model will hurt DVD sales, and strong-arm tactics from Warner Bros. hasn't affected that model at all.
Meanwhile, Coinstar is gearing up for a great year, largely propelled by Redbox sales. The company said that for all of 2012, it now expects revenue at between $2.16 billion and $2.28 billion. Earnings before taxes and other deductions are estimated at between $465 million and $495 million.
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I agree, I just came off 5 payday loans myself but that's another story. Coinstar has consistantly provided my family with entertainment at a fair and reasonable price through
Redbox. When it first came in front of our 7-11 we paid no attention and just thought it was a
fad, being loyal Blockbuster fans; however, when Blockbuster started charging $2.00 and
more, indescriminately, we realized the true value of the consistant $1.07 per day for a dvd
we could all enjoy! Now at $1.20 we are incorporating the cost increase into our budget to enjoy a movie whenever we can. Let's face it the price of everything is going up and in
comparison to the price of gas a year ago at $1.77 per gallon, now gas here on the west
coast is at $4.10 more than doubled, so I think it's a fair increase and now I can buy shares in
coinstar looking for growth, and i'm hoping it will put my kids through college! Warner Bro's should be more concerned with Crackle.com where you can watch movies for free and realize
Coinstar and Redbox is their allie not their enemy!
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