It’s not often that the market cheers when a retailer sticks it to consumers.
But in the case of Redbox, which on Monday increased DVD rental prices by 25 percent, the stock of parent company Outerwall shot up 12.3 percent to close at $71.39 per share.
What spared the DVD-by-kiosk company — and goosed its stock — was the headline of its price-increase statement: “Redbox remains the best value in home entertainment.”
In addition to raising daily DVD rental prices from $1.20 to $1.50, Redbox increased the daily rental for Blu-ray discs from $1.50 to $2 and for video games, from $2 to $3.
After doing the math, analyst Michael Pachter of Wedbush Securities confirmed a month of Redbox movie watching is still cheaper than the price-oriented alternative.
That’s Netflix by mail, which at $8.99 a month delivers about four movies once mailing time is considered. Redbox costs only $6 for the same entertainment.
Pachter, who noted both alternatives undercut the $5 to $6 commanded by video-on-demand rentals, said the new price points would likely cause Redbox to lose a little in volume — but make up for it by boosting the company’s operating-profit margin to 40 cents on the dollar.