Redbox has apparently launched a test in which it is now charging $1.15 and $1.20 per day for movie rentals in Austin. This is up from the standard $1 the company usually charges. It is not the first time that Redbox is testing higher prices locally, but the company has generally kept its $1 program in place.
There was no official statement from Redbox, but Eric World, an analyst quoted by Home Media Magazine, feels that Redbox has room for price hikes and if the company did decide to increase prices, its rentals would still be perceived as a bargain.
"Although price increases of 15% to 50% could seem aggressive, we believe these prices still represent a significant value relative to other single-use rental options — such as $4 to $5 for VOD and $2.99 for new-release DVDs at Blockbuster," Wold wrote in an Aug. 15 note.
A price increase appears to be just a matter of time and may be necessary for Redbox to pass on increased cost for DVDs and Blu-ray discs as well as cost of new movie deals.
"While any assumptions could be made at this point, we believe management has enough data at various prices to know what change would yield the greatest positive result," Wold wrote.
The analyst said that a price increase could generate about $26 million in pre-tax income for Redbox.