Outerwalls Q4 Revenue Profit Fall As Redbox DVD Rentals Plunge

BELLEVUE, WA -- Movie rentals from Outerwall's Redbox kiosks fell 24.3% in the fourth quarter, contributing to an overall 61% decline in net income and 17% drop in revenue.

Outerwall's fourth-quarter 2015 revenue was $527.2 million and net income was $17 million, or $1 per share. Revenue in Outerwall's Redbox business declined 17% to $407 million, down from $490.7 million year over year.

Redbox rentals declined to 135.8 million in the 2015 fourth quarter, down from 179.5 million a year earlier. Outerwall blamed the drop on fewer titles available to rent and on price-sensitivities following Redbox's December 2014 fee increase, when the daily rental rate for DVDs rose from $1.20 to $1.50.

Redbox said rentals in its most recent quarter were also impacted by its removal of underperforming machines. The company operated 40,480 Redbox vending machines at the end of 2015, removing 1,800 units. In 2016, it expects to remove 2,000 more and for rentals to decline another 15% to 20%.

Operating income in Redbox's 2015 fourth quarter was $62.6 million, a 50% decline from $125.8 million in the year-earlier period. Outerwall attributed the lower margin in part to higher content purchases and promotions intended to bring consumers back to the kiosk "after an extended period of weak content." Outerwall also allocated $8.4 million in restructuring and related costs to Redbox in the fourth quarter of 2015.

"Redbox is a compelling business, providing new movie releases to millions of loyal consumers at a great value," said Outerwall chief executive Erik Prusch, who also is interim president of Redbox. "We will manage the business for profitability and cash flow, and we will continue our focus on expense management, operational efficiencies and network optimization."

In December, Outerwall announced that Redbox president Mark Horak was leaving the company after less than two years in the post. Prusch is serving as interim Redbox president until the company finds a replacement.

In addition to Redbox, which represented 77% of Outerwall's revenue, the company operates Coinstar coin-counting machines and 2,250 ecoATM electronics recycling kiosks.