Coinstar may take revenue hit from increased debit card fee

Feb. 3, 2012

Coinstar Inc, parent of DVD-rental firm redbox, may report slightly lower than expected fourth-quarter earnings as the company grapples with a new federal law requiring higher fees for small debit-card transactions, according to a story in the International Business times.

Reuters expects the Bellevue, Wash.-based company to report a net profit of $20.93 million, or 65 cents a share, down 7.1 percent from $22.42 million,or 68 cents a share, in the same period last year. Analysts expect revenue of $496.41 million, up 25.1 percent from $396.76 million last year.

Redbox, with 28,000 U.S. kiosks accounting for about 84 percent of Coinstar's revenue, was hurt by a provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act that became law in 2010. It did not take effect until Oct. 1, 2011, however. The provision raised charges on small debit card purchases, which caused redbox to pay 27 cents on each rental made by debit card, an increase of 9 cents, according to D.A Davidson analyst John Kraft.

Although redbox raised its rental fee to $1.20 from $1, it waited until Oct. 31 for rentals of DVDs and Jan. 31, 2012, for online rentals, which Kraft said left a big part of the fourth quarter in which movie rental margins were compressed.

Coinstar could not be reached for comment.

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Topics: DVD Kiosks , DVD Rental , Vending Kiosks

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