Blog

1 Nov, 2011
By: Chris Tribbey

NORTH HOLLYWOOD, Calif. — There was something apropos about the dozen or so pennies sitting in plain view atop a Redbox kiosk in front of a 7-Eleven here.

Consumers rented and returned for an hour Halloween night, the first day Redbox’s price jumped 20% to $1.20 a day, and the pennies were never touched. Just like those pennies, consumers paid little heed to the 20 more cents they were paying for a Redbox DVD rental.

“I still think it’s cheap,” said George Alonzo, a 50-something local resident who was returning two titles his son had rented. “We get everything from comedy to action, stuff for the kids. We’ll keep renting.”

Jose Villanero, a 28-year-old local who’s been using Redbox “for years,” was there to rent, and he didn’t know about the price increase. And he didn’t bat an eye when the $1.20 rental fee showed up.

“I usually get them back the next day, so I’m not worried about it,” he said. “Absolutely, it’s still a decent price.”

Investors and industry observers seem to agree, with many suggesting Redbox won’t see nearly the blowback Netflix encountered when it raised its combined DVD and streaming rate by 60%, charged separately for those services, and attempted to split them (with the last plan aborted after consumer feedback). Oct. 24 Netflix said it had lost 810,000 net subscribers in the United States during the third quarter, ended Sept. 30.

“A 20% increase in price for the [Redbox] customer is negligible when in actual dollars, it is a 20-cent-per-night increase,” wrote full-time investor Joseph Poma for SeekingAlpha.com. “For Coinstar though, a 20% increase in price will yield a tremendous increase in revenue over the subsequent quarters. I don’t anticipate any drop off in sales due to the price increase, and I anticipate increased growth even during the holiday season.”

Sean Portnoy, a technology writer for ZDNet.com, wrote that Redbox’s price increase might actually be in direct response to Netflix’s woes.

“Redbox may be a little sneaky trying to drop this fee increase in while one of its main competitors is suffering a PR disaster for raising rates, but that’s also a good way to avoid some of that same heat,” he suggested.

As for Redbox itself, Paul Davis, CEO of Redbox parent Coinstar, used caution when announcing the price hike Oct. 27.

“We remain committed to providing Redbox consumers access to the latest movies at an incredible value. This marks the first price increase for a Redbox standard-definition DVD rental in eight years,” he said. “We didn’t make the decision lightly.”

Source:

http://www.homemediamagazine.com/redbox/consumers-not-too-concerned-over-redbox-price-hike-25522

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