All Right Reserved. And that's where we see the opportunity. We want to be able to offer more choices to consumers than anybody else. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. April 22, 2023. The legacy business going from profit to loss will make the situation even worse. A:We expect to close the transaction in Q3 of this year. A bankruptcy filing does not necessarily mean that a company is going out of business. In Redboxs next chapter as a public company, we will be focused on delivering a differentiated, affordable entertainment experience for our millions of loyal customers, and seeking profitable growth for shareholders.. Redbox has expressed interest in buying Netflixs closing DVD business several times, but the streamer has continually rejected its offers, according to a report from The Hollywood Reporter. The companys app allows some free movie rentals on demand and also allows customers to subscribe to premium television networks like Showtime. As far as DVD rentals go, the core issue as management sees it is the lack of new releases. 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I haven't read the B. Riley report, but I'd point out that a) Riley was the advisor to Seaport Global for the $50 million PIPE financing that took place alongside the Redbox merger and b) $35 suggests an enterprise value for Redbox nearing $2 billion. Chief Financial Officer Kavita Suthar in May projected "a recovery" in the second half of this year, followed by a normalized release slate in 2022. An on-demand movie such as the latest Ghostbusters can be rented from Redbox.com for $6. Absolutely. "What do you have for me lately?" That doesn't seem to be the case for Redbox, whose profit margin fell and went negative as revenue decreased. At the most recent Federal Open Market Committee meeting (FOMC) in During times of high inflation and economic uncertainty, many parents have higher financial priorities than saving for their kids' college education. The company has effectively stopped offering video games for rent through its red kiosks, but game sales will continue for a little while longer. According to management, 70% of legacy business customers consider themselves "late adopters," making them an attractive target for Redbox and its partner. The thin float alone means it can stay elevated (even if short interest remains rather low at the moment), and the rally Thursday, if anything, shows how little it takes to get a rally in this stock going. They have only $100 million of tangible assets and over $350M of long-term debt. The legacy business showed some improvement in terms of year-over-year declines: revenue fell 66% in Q1 and 56% in Q2. Redbox said it converts on average over 80% of its adjusted EBITDA directly into free cash flow. Obviously the physical business has been impacted by COVID. Redbox doesn't have the resources to match them. RDBX already has hit that mark in 9 of 11 sessions, and eight straight. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). To top it all off, Redbox now has legitimate balance sheet concerns. This SPAC merger seems far more likely to have been about Apollo exiting a profitable trade than the company looking to stick with a declining business for any longer than it has to. They place them in busy retail locations to offer a selection of DVDs that can be rented for a few dollars. Mission: Impossible Fallout. Rent On Demand: Queen & Slim 3/3. Theyre a common sight outside of supermarkets and The company is experimenting with distributing content through various windows, including premium video-on-demand, lower-priced transaction video-on-demand or pay-per-view, and ad-supported platforms. Bear in mind that Redbox predicted consolidated top-line growth for the year, with the legacy business off less than 2% and digital revenue up 75%. Redbox stock cut in half after company warns of multiple Home goods retailer Bed Bath & Beyond closed 43 stores in February, after 63 closures in 2020. Although gross margins have been stable, operating expenses did not fall far enough to prevent them from swinging to a loss in 2020. Gap Inc. is closing about a third of Banana Republic locations "with the goal of having a smaller and healthier fleet of stores," the company said. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. What Redbox is pitching sounds like it might have been innovative in 2014. A: One of the most interesting trends over the last two to three years has been the significant growth of the dollar store channel. Can you offer some financial detail on that? Amazon (AMZN) and Roku (ROKU), among others, offer the single sign-in for premium channels. In 2010, GMAC rebranded itself into Ally Financial, completing its transition into a bank that was approved in 2008 by the Federal Reserve Board. Year: 2019. Not only can you rent it from Redbox, but you can rent it on Amazon or iTunes, and every time a customer transacted there, they paid us because we own those rights to the movie. For example "Shadow of the Cloud" has been one of our best performing films. It's impossible to see any real differentiator here at all, other than the existing customer base. It clocked double-digit sales growth from 2009 to 2011, ultimately growing sales to 92 million gallons by 2012, almost triple its 2003 level. Redbox no longer rents video games, and it will end game sales Despite the shift in strategy, Starbucks says "high-traffic areas like malls, airports, campuses, and our other licensed locations will remain a key pillar of the Starbucks experience.". Disney also acknowledged that this change would lead to layoffs but declined to say how many people will be impacted. Greeting card store Paper Source filed for Chapter 11 Bankruptcy and announced plans to close 11 of its 158 stores. Is Redbox Removing Its Kiosks, Or Just Moving Them? While the website CancelledSciFi.com has its doubts about SyFys ability to persist with declining views and canceled shows, Deadline reports that the SyFy channel has continued to order new shows, so it may be clinging on to a die-hard fan base by a hair. Then, in July 2018, Radio Shack struck a deal with Hobby Town USA to open approximately 100 Radio Shack Express stores and this number expanded to around 500Radio Shack stores as of 2018. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Accessories retailer Fossil is closing at least 65 stores after decreased sales in 2020, BisNow reported. I think you'll see a little bit of a hybrid structure in terms of theatrical and how it gets to the home. The move follows Uber's Uber Eats explansion. Then in May, we sold streaming rights to Hulu. But also a little too qwik for its customer base especially when it came with a substantial increase in price. Poulos: We had obviously heard a lot of talk about the absentee ballots. [Linear media follows a programming schedule, rather than being accessed on-demand.] In an age of streaming, this approach to renting movies and video games feels like it came from the stone age. 2020 The story here didn't seem particularly attractive when the merger was announced in May; it looks far worse after a subsequent and significant cut to the 2021 outlook. Redbox Automated Retail LLC, which is in the process of going public via a reverse merger with special purpose acquisition company Seaport Global Acquisition But in every aspect of the business plan, Redbox is far behind. 2023 GOBankingRates. Recognizing the need to adapt to changing consumer leisure habits, Redbox recently went public with the intention of expanding its role in home entertainment. But now, Redbox finds itself on the other side of innovation, replaced by streaming services and on-demand digital rental. From my perspective, unless Redbox does something quite radical, the company will be gone by 2025if not sooner. To combat that I think you'll see streamers wade into more and more original content, and they'll make their own movies. Pictures provided by Redbox and iStock. And we then saw a huge rally in late trading Thursday, one that coincides with a blog posting on this site that disclosed a $50 price target. As IBM, Apple and Dell changed the game, RadioShack lost its identity and struggled to find a new one. With all due respect to my fellow author, the post here on Seeking Alpha offers little in the way of analysis, and zero justification for the $50 target. Most of our movies are coming through those movie theaters. It's (usually) new releases that drive consumers to Redbox kiosks, and without those enticements revenue unsurprisingly fell. Slashed 2021 guidance led to an 89% redemption rate in the de-SPAC merger and leaves balance sheet concerns going forward. The company is coming back to the public markets in a SPAC merger. Ghostbusters: Afterlife release date: July 10. Redbox As a result (according to that same proxy statement), the outlook for this year has been slashed. Research firm Coresignt predicts this trend will continue into 2021. Carlson had signed off of Friday's show by wishing viewers the "best weekend" and telling them he'd be back on Monday. At the time, Macy's also announced that it would cut 2,000 corporate jobs. The network has said in a press release Monday that the popular and controversial prime-time host's last program aired on Friday. I have no business relationship with any company whose stock is mentioned in this article. However, the brand got a chance to refashion itself for the new millennium when it took social media influencers for a ride with its Palessi publicity stuntin late 2018. Prescient? Sign up for notifications from Insider! Yes. As part of the transaction, all existing shareholders will roll 100% of their equity in Redbox, including funds managed by affiliates of Apollo Global Management, which acquired Redbox through the acquisition of Outerwall in September 2016. The SPAC Deal: Redbox is going public in a merger with Seaport Global Acquisition Corp SGAM valuing the company at $693 million. The third is that the projections for the legacy business from May looked ridiculous at the time. See: 22 Side Gigs That Can Make You Richer Than a Full-Time JobFind Out: How To Is a recession looming? I wrote this article myself, and it expresses my own opinions. The legacy business going from profit to loss will make the situation even worse. In 2020, more than 8,300 US stores closed, following 9,300 in 2019, according to Insider analysis. Best Buy is closing five stores across the US in early 2021, the retailer confirmed to four local news outlets. There are three rather incredible aspects of the guidance cut for 2021. The women's clothing retailer is in the process of closing all 400 stores and selling store fixture. The company has an email database of over 46 million customers and has seen 43 million customers download its app. If you come to the Redbox kiosk you're going to have the latest new movies at the best pricing. Today, if there is an issue with an Amazon locker, it's one of my Redbox employees that goes and services that kiosk. However, the channels generic name meant that it couldnt be trademarked, prompting executives to change it to Syfy in 2009. WebIs Redbox going out of business? Redbox Sees an Untapped Streaming Market In Its 39 Most movies are made available digitally at the same time or before a DVD release, meaning Redbox has no advantage. Many of its movies can now be rented online through a video-on-demand platform with Redbox even offering a new free streaming service that is supported by advertisers. From my perspective, unless Redbox does something quite radical, the company will be gone by 2025if not sooner. If it's possible, though, it's ideal to start New year, new you! Overlooked Alpha launched April 2022 - subscribe at overlookedalpha.com. offerings. Founded in Topeka, Kansas, in 1956, Payless ShoeSource has long stood as a bastion of low costs in an otherwise pricey world of footwear, offering a variety of options that wouldnt break the bank. Out Question: What happens when you eliminate sugar from your diet? At its peak, RadioShack had nearly 7,400 stores and 5,200 as recently as 2014 but now all but 28 of them are closed. I don't see us as competing with Netflix, I see us a complementary to Netflix because we can help get their customers get theses new movies that aren't available on Netflix. Sorry, The Accountant is not available on American Netflix, but you can unlock it right now in the USA and start watching! Unfortunately, while the Palessi stunt proved a runaway success in terms of garnering media attention, it was all too little, too late. Studios even experimented with simultaneous digital and theater releases during the pandemic and ended up cutting the exclusive theater window by about half. But the SPAC route actually makes more sense given the story Redbox is trying to tell. I strive to understand companies and find compelling investments. Redbox Automated Retail LLC, which is in the process of going public via a reverse merger with special purpose acquisition company Seaport Global Acquisition Corp., is aiming to evolve its business beyond its legacy DVD rental kiosks to include more revenue from streaming partnerships, ad-supported content and other business. The problem for Redbox is that the reasons to use their service are going away. We make it infinitely simpler because you can get all those movies at Redbox. The 2011 sale of MySpace was to Specific Media but included a stake taken by Justin Timberlake, and the social network tried to pivot into a creative community where musicians, photographers and entertainers who gravitated to Myspace could connect with their fans. The move prompted an exodus of some 800,000 membersand a disastrous 77%decline in the companys stock. You walk up to the kiosk, you use your NFC chip and your phone, and it signs you in and gives you a personal experience at the kiosk. The company now offers banking services, credit cards, wealth management, home loans and refinancing. A specific movie might be unavailable or more expensive on the web. The live TV is also integrated with video on-demand. I am not receiving compensation for it (other than from Seeking Alpha). It's a story, for both the legacy DVD rental business and a nascent digital offering, that rests on future potential, not past results. Disney, Best Buy, and Macy's are a few of the stores planning to close locations this year. Clothing store Express was already in the process of closing more than 90 stores when COVID-19 hit. That business has been in freefall for years. If you think about what's happening in the space, one of the downsides to the growth of all the subscription services and their buying out content is that it does limit who sees those movies, because you have to be a subscriber. It lacks any differentiation from other online competitors, who spend billions on exclusive content and customer acquisition. Video progress is saved to your account so you can stop watching a video on one device and resume it later on another device. The innovative company started up in 1997, saving you a trip to the not-yet-defunct Blockbuster Video. I wrote this article myself, and it expresses my own opinions. Revenue now is expected to come in at $400 million, a 27% decline. The chart above suggests most of the trading took place after 3 p.m. Obviously, there were not too many buy-and-hold types involved at that point. They launched an on-demand digital service in 2017 and more recently added free live TV and ad-supported content. Its an app that people can use just like a regular wallet to store their card details and information. USA Today 2021 performance can still be blamed on the pandemic because the number of movies released was even lower (33 vs 63). Despite the momentum, Covid-19 hit Redbox hard in 2020. That's not to say that Redbox is promising long-term growth. Why AI Has Some Viewers Asking Which Film Actors Are Real. clearing $1 billion in profit in three of the last four years. We charge $2.50 a night for ultra high definition. I am not receiving compensation for it (other than from Seeking Alpha). Redbox expects cord-cutting will accelerate among its 40 million value-conscious consumers as the cost of pay TV subscriptions rises. Meanwhile, the legacy DVD rental business was coming off a weak 2020, but Redbox sees stabilization in 2022 and even modest growth in 2023. As a brand synonymous with new-release movies and one of the largest operators of self-serve kiosks, Redbox recognizes the need to adapt to changing consumer leisure habits. Revenue of $40 million in 2020 is projected to grow nearly tenfold in three years. It also ignored $38M of "one-time" expenses in 2020 even though they have similar expenses every year - $25M in previous years and over $10M in 2021. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Total revenue declined 34% in 2020 compared with 2019, from $829 million to $546 million. Q:Why did you choose to partner with Seaport? Follow Along: 31 Days of Living Richer. Star Wars: The Rise of SkywalkerAvailabe March 31. Since their online services lack any competitive advantage, the only unique asset to support digital revenue is their kiosk business. We look at it on a project-by-project basis. S&P Global Market Intelligence recently spoke with Redbox CEO Galen Smith about the future of Redbox and video entertainment in general. In the 1920s, cars were still a luxury, and most people had to buy with cash. Now we're at this point where there's an opportunity to have this additional capital and really accelerate the growth that we have ahead. They're the best in class. Ninety percent of Americans live within five minutes of a Redbox kiosk. Digital revenue doubled to $40M in 2020, helped by the launch of their live TV service and the general bump in online demand we saw during the height of the pandemic. The unit has launched 16 titles to date with 26 titles in development. Theyll begin with a prototype store in Miami, Florida, also home to their headquarters. And at the Analyst Day in July, management forecast mid-single-digit volume declines beyond 2022, though Chief Executive Officer Galen Smith said his company might have some room to take pricing. Myspace was on the cutting edge of social networking, created in 2003 and dominating the social networking industry until 2008. Is this happening to you frequently? Redbox Entertainment, which operates a national network of DVD-rental kiosks and a streaming-video business, said it laid off 150 employees, roughly 10% of its total There is less reason for a middle man (either a theater or rental company) if they can sell their content directly to consumers on the internet. Redbox shares have plummeted after going public via a SPAC several months ago. Please. That trading likely helped Thursday's rally as well, by creating a pre-existing catalyst that could have amplified the move. It's about providing the best quality home entertainment for everyone. Redbox has pointed to the size of its existing customer base - 39 million loyalty members, 46 million email subscribers - as a significant advantage for marketing. Since the so-called de-SPAC merger between Redbox and Seaport closed last month, it would seem like that story has been well-received by investors. Redbox going out of business Members returned, and the rebrand was a smashing success after some much-needed change. We know this because Redbox of course used to be part of Outerwall, which was a public company. The new shareholders will retain the rest of the company. Q:How do you characterize the current demand for movie rentals versus streaming video? Currently, Redbox prices are $1.75 a night for DVDs and $2.00 a night for Blu-rays (before tax). In 2020, the company had revenue of $546 million, with the pandemic being cited as a reason for the year-over-year decline. Dark Waters 3/3. Share All sharing options for: Redbox no longer rents video games, and it will end game sales this year. It's been a great thing to be able to lift all boats as we introduce these products to the marketplace. Redbox launched its streaming app in December 2020, and its available on nearly every TV and mobile platform. We believe there will always be a subset of the population that will love the physical side of the business, but the digital world and over-the-top services opened up whole new opportunities for content. Public again: Redbox readies a new era in home entertainment Take a look at these companies that pulled off genius makeovers that rocketed them to a new level of success. Growth in the digital business seems unlikely; hitting $40 million again, let alone the prior $70 million top-line target, seems difficult against first-half revenue of just $16.4 million. That is our differentiator. Japan and Chinawill not be affected. A post-Covid rebound will help, but might not matter because their business is in decline regardless of the pandemic. Yaghoobzadeh: Management grew the business by 4.5 times. Running a company is never easy, and 2020 was even more challenging, presenting business owners with an unprecedented set of circumstances. The major movie studios are owned by media conglomerates like Disney (DIS), Paramount (VIAC), NBCUniversal (CMCSA), and WarnerMedia (T) who have recently launched their own streaming services. Buy On Demand: Black Christmas 3/3. Over the following four years - which included a further explosion in streaming led by Netflix and Disney (DIS), plus ongoing changes to the theatrical window - Redbox told investors that same business would erode by just 10%. Over 3 million customers have taken part in Redboxs TVOD expansion. Do you think the big leap in streaming consumption during the pandemic was a high water mark that will recede in the near term? As of April 2023, the U.S. national debt has reached a record high of more than $31.5 trillion. What follows is an edited version of that conversation. Read: People Spent a Lot on These Streaming Services in 2020 and Heres What They Watched. We expect to trade on NASDAQ under the ticker RDBX. Redbox CEO Galen Smith sees a big future for home entertainment as consumers become more engaged with self service. In the long run, the stock bounced back (and then some). And that creates a pretty large short-side risk. Redbox going out of business Here are the 30 best new movies at Redbox: Coming to the Box and On Demand in March 2020, Many Redbox kiosks have DVDs available for rent for $1.75 per day, plus tax (except for jurisdictions that do not require sales tax to be charged or collected), so if you keep that DVD for the one-day minimum rental period and return it two days later by 9:00 p.m. local time, you will be charged $5.25 plus applicable. The company targeting increasing the output of Redbox Entertainment originals to more than 36 new releases per year. Godiva closed all of its North America stores this year. In an attempt to stem inflation, the U.S. Federal Reserve raised interest rates seven times in 2022 and then again in February 2023. TVOD is already led by Comcast (CMCSA) unit Fandango after its acquisition of Vudu, and by Redbox's own numbers TVOD is a market that is not expected to grow: Source: Redbox Analyst Meeting presentation. We think we're going to have more movies in 2022 than we've had in five years. I wrote this article myself, and it expresses my own opinions. Even though the stock has fallen 75%, it could still fall to zero if neither the legacy nor digital business can make a profit. Redbox to Go Public in Deal With SPAC, Company Valued at $693 Shares of movie-rental business Redbox Entertainment Inc. were falling Wednesday after the company reached an agreement to be acquired by Chicken Soup for Joel Andersonand Jordan Rosenfeld contributed to the reporting for this article. Unlike Redboxs set $1.75a day prices, Redbox on Demand rentals start at $3.99for older titles, $6.99 for new releases anddigital purchases going for $10 or more. Valuation is far from attractive, even after the recent pullback. In the long run, the stock bounced back (and then some). There was an unknown error. Todays announcement brings us one step closer to building an entertainment ecosystem and underscores our steadfast commitment to enhancing our customer value proposition, Galen Smith, CEO of Redbox, said in a statement. In June 2016, Tribune Online Content shortened its name to tronc, adopting a colorful modern logo and even catching the internets lowercase vibe by dropping the capital letter at the front.
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