Redbox Mirrors Netflix, Raises Rental Rates

Video rental firm Redbox said it would raise its daily DVD rental rate by 20 cents to $1.20, citing higher operating costs, including an increase in debit card fees that went into effect Oct. 1. TheWrap.com also reported that Redbox plans to have a streaming business plan in place by the end of this year.

Redbox's latest move comes after rival Netflix Inc. (NASDAQ:NFLX) earned the wrath of customers after it said in early July that it would raise the price for a combination DVD-and-streaming video plan. The company raised the monthly price by 60 percent to $15.98 from the previous $9.99.

Though Redbox's price rise isn't high as Netflix, there are possibilities that customers may feel disappointed and it may lose some gains it fetched from the Netflix fiasco.

Coinstar shares fell 9 percent in the Friday morning trade, despite the company posting solid quarterly results. Coinstar earned $1.18 per share for the third quarter. This compares to earnings of 60 cents per share last year and 88 cents predicted by Wall Street.

The company's revenue rose 22 percent to $466 million, about $3 million above analyst projections. Redbox revenue climbed 28 percent in the quarter to $390 million.

The increased rate for movies would become effective Oct.31 and it is the first time in eight years Redbox has raised its daily DVD rental price. However, the rent for Blu-ray Discs and Video Games will stay at their current daily rates at $1.50 a day and $2 a day, respectively.

The amount was selected to best offset expenses while keeping our value commitment to customers. We conducted several months of testing and with careful consideration, decided the 20 cent adjustment would work best to keep prices as low as possible, Redbox said in a statement.

Redbox, which is owned by Coinstar Inc. (NASDAQ:CSTR), said it is always providing smart phone apps, games product, and more of the top new releases to accompany the rate hike.

Washington-based Coinstar shares are trading at $48.05, down $4.95 or 9.35 percent on Nasdaq.