Everyday brings about another round of the on going disagreement between the Hollywood studios and Redbox.  The fight is over Redbox providing Hollywood’s new precious films to the paying public for low rental prices.  The Redbox distribution method is cutting into the studio’s profits from DVD sales.

The latest salvo in this on going siege has been launched by analyst Eric Wold, an employee of Merriman Curhan Ford.  Mr. Wold has chipped in with his opinion of what is going to be the end result of this legal confrontation between Redbox and Hollywood.  In his opinion, he doesn’t think the studios victory over Redbox, should that be the case, will have a far flung effect on the distribution company’s business.  They may loose some investment money and they may have to rethink some of their business strategies if Hollywood can get the distributors lawsuit off the books.  Wold believes this event will be very unlikely.

Wold also feels the studios are spitting into the wind if they think cutting the supply to Redbox will harm the movie rental distributor.  The cost to Redbox would barely touch the money this low cost distributor brings in.  “The cut into Redbox’s profit from this move by Universal and Fox amounts to “$338 million to $401 million of Redbox’s total revenue ($1.19 billion).”

Forcing Redbox to purchase new release material via discount and retail vendors won’t jack up the price of movie rentals more than one to two dollars for each DVD according to Wold.  His pediction is this may cost Redbox a profit loss of $12 to $25 million next year.  They will still be bringing in a good steady income.

Redbox will still be a viable company even if they are forced to purchase their movies at retail just like other consumers.  Although he did not divulge where he obtained his figures and information, he strongly believes that even if the studios win, they will still feel the pain from the Redbox rental distributors cutting into their consumer retail sales.

The long and short of the situation is that this analyst believes Redbox and its parent company Coinstar are still a solid investment.  While this whole confrontation between Redbox and the studios is not over, it doesn’t appear likely that the Redbox kiosks are going away.

Source: InsideRedbox