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Wal-Mart, Target put the squeeze on Redbox

February 3rd, 2010 12:00 am by Staff Report

According to BusinessWeek Wal-Mart is boxing out Redbox by imposing strict limits on the number of DVDs a customer can buy at a time, making it harder for movie-rental kiosks such as Coinstar's (CSTR) Redbox to get their hands on large numbers of newly released discs.

The new rules took effect Feb. 1 and include a five-DVD cap on new releases, mirroring limits placed by Target (TGT) in December. Target's cap remains in effect for one week to several weeks after a movie is released to stores.

Redbox and NCR (NCR) are among the largest U.S. operators of DVD-rental kiosks, which rent movies for about $1 a day and, according to Adams Media Research, are the fastest-growing distributors of movie rentals. Kiosk rental sales are expected to rise 42% to $1.3 billion this year, Adams says, stepping up competition vs. other rental services, including Netflix (NFLX), iTunes owner Apple (AAPL), and rental stores such as Blockbuster Entertainment (BBI), which in 2008 reached an agreement to let NCR rent movies under the Blockbuster Express brand.

Limits at Wal-Mart and Target make it all the more urgent that Redbox and NCR find ways to buy DVDs directly from studios. "The more difficult it is for them to get product, the more motivation they have to reach an agreement with the studios," says Tom Adams, president of Adams Media Research. "It increases the pressure because it increases their costs."

Read the full report at the BusinessWeek Web site.

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