M&E Daily

Redbox Raises DVD Rental Prices, Citing Rise in Operating Costs

Redbox next week will begin charging $1.20 per day for DVD rentals at most of its 27,800 locations nationwide, following tests of the higher price point this past summer.

The 20 percent price hike “is based on an increase in operating costs, including higher debit card fees that went into effect October 1,” Redbox tells customers in an announcement on its website. The amount, Redbox says, “was selected to best offset expenses, while keeping our value commitment to customers.”

Whether Redbox’s price hike impacts customer behavior remains to be seen. As GigaOm points out, Coinstar investors had expected Redbox revenues to rise following the outcry over Netflix’s recent price changes. But with Coinstar reporting third-quarter revenue that was only slightly above analyst expectations, it is unclear whether Netflix’s subscriber losses during the third quarter translated into customer gains for Redbox. (The division continues to grow in general, having earned $1 billion in the first nine months of 2011, according to Coinstar.)

During the company’s test of the $1.20 price point in August, one analyst predicted that few Redbox DVD renters would balk at the increase. But the hike could lead to customers renting fewer DVDs, or renting discs for fewer days, analyst Eric Wold of Merriman Capital acknowledged in his August note.

In any event, the increase is unlikely to placate studio executives such as Time Warner’s Jeff Bewkes, who contend that Redbox’s pricing model devalues studio content.

Rentals of Blu-ray discs and video games remain at their current rates ($1.50 per day and $2 per day, respectively).

In a concurrent effort to drive traffic to its website, Redbox is launching a month-long promotion under which customers can reserve DVD rentals online for $1 for the first day. Customers pick up the reserved discs at their local kiosks.