Redbox Franchise Profits – Do They Make Any Money?

There are still many spots that would be great to have a Redbox franchise machine, but how do you get one?  While there is not a Redbox franchise profit since the company does not franchise their machine, perhaps there is a way to profit from the DVD kiosks.  While there are not official industry figures as to how much an individual kiosk can profit but we have found a few clues through corporate SEC filings to help determine what those profits may be.

Before investing in a DVD kiosk franchise you may want to consider a few things before investing in the long term profit potential.   First of all will people continue to rent DVDs at a kiosk?  While at the current moment in time that seems like a distant concern, especially with the popularity of Redbox machines but they have been around for just over 10 years.  Once upon a time, a video store was touted as a great business decision but consider the same technological advances that ushered in the Redbox are bringing in an increased capacity of broadband and it may be a matter of time that instant movie downloads to the home that makes DVD kiosks a thing of the past.  Secondly loaded machines are reported to cost between $20,000 to $25,000.  With a movie rental at $1.20, you are looking at around 21,000 rentals to just pay off the machine and initial inventory.  Don’t forget that you will have to buy new inventory, pay merchant account fees to accept credit cards, pay someone to maintain the machine, pay for a rental location and possibly pay for electricity and an internet connection to transmit inventory and payment information.   Discussions with company analysts suggest that kiosks have an average monthly overhead of almost $3,500.

Back to Redbox franchise profits.  Redbox is owned by a parent company named Outerwall (Nasdaq symbol OUTR). Outerwall was previously known as Coinstar and is reported to have taken over 50% of the physical movie rental market.

Outerwall’s net income for the last 12 months were $2.28 billion, gross profit of $693 million and net profit of $175 million. The latest quarter showed 199.5 million rentals across their kiosks This income is a result a all of it’s automated retail solutions which include not only Redbox, but kiosks in coins, coffee, refurbished electronics and self-service photo booths.  While these numbers include all of the different kiosks, a reasonable assumption can be made that they should be close to the Redbox figures as Redbox makes up a significant portion of sales.  As such gross profit would be approximately 30% of sales and net profit (the amount they take home) is 7.67%.  According to B. Riley & Co. analyst Eric Wold,  the company generates $45,000 average revenue per kiosk, which was down from $50,000 the previous quarter making the argument that streaming videos are taking a big chunk of revenues and the long-term viability of the DVD kiosk may be in jeopardy.

Extrapolating the above numbers an average kiosk would bring a gross profit ($45,000 * 30%) of $13,500 or a take home, net profit of $3,452 ($45,000 * 7.67%).  While these numbers are estimates and the take home number includes the perks of the executives of the company and other corporate waste that is typical in large businesses, if the industry leader is bringing in only $3,452 per kiosk on average, there may be better business opportunities elsewhere.