Redbox Continues its Netflix Assault with Canadian Invasion
Netflix can run but it can't hide from Redbox's continued growth and expansion.
This time the DVD rental service, which is owned and operated by Coinstar (NASDAQ: CSTR), is bringing its famed kiosks to Wal-Mart (NYSE: WMT) stores all across Canada. According to The Globe and Mail, Redbox has also signed a deal with Alimentation Couche-Tard Inc., a national convenience store operator in Canada, to bring its DVD rental kiosks to additional locations.
Redbox's expansion comes at a time when Canada -- the third-largest market for DVD rentals after the United States and Japan -- is losing its biggest video rental chains, including Blockbuster Canada and Rogers Video.
According to The Globe and Mail, "There has been a vacuum in the estimated $1-billion Canadian DVD rental industry since Blockbuster Canada was pushed into receivership last year. More than 400 stores were closed across the country as a result, and Rogers Communications Inc. announced earlier this year it would also stop offering movie rentals in its stores."
Citing data from Convergence Consulting Group, The Globe and Mail said that stores' market share for rentals has fallen to about 20% of the overall rental market. But it's not just DVD rental services like Redbox that caused this to happen. Netflix (NASDAQ: NFLX), which (in addition to DVDs by mail) offers an online-only streaming video service, has also had a significant impact on brick-and-mortar outlets.
Redbox's interim president, Gregg Kaplan, thinks that the Canadian venture could be very profitable. "Historically, a pretty good rule of thumb, what we've seen in other businesses is that Canada can get to roughly 1/10 the size of the U.S. market," Kaplan told The Globe and Mail. "We're not projecting that yet because we haven't had the experience there, but it feels like it could be sizable."
Canadians can expect to spend $1.50 for standard definition rentals, $2 for Blu-ray, and $2.50 for video games. By comparison, Kaplan said that brick-and-mortar retailers used to charge $4 or $5 per rental.
As a result of the expansion, Coinstar shares are up more than 2.7% today.
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