Redbox Movie Rentals Plunge 24%

Outwerall Inc.'s Redbox reported a 24% plunge in movie rentals last quarter, signaling that even budget-conscious consumers are abandoning Hollywood's once-lucrative DVD business.

The drop contributed to a 17% decline in Redbox revenue during the three months ended Dec. 31, to $407 million, and a 50% decline in its operating income, to $62.6 million. Outerwall shares were down 24% in after-hours trading, to $25.00.

Redbox rented 135.8 million DVD, Blu-ray and videogame discs in the quarter, compared with 179.5 million in the same period a year earlier.

The company attributed the drop to "an accelerated decline in the physical market," as well as fewer titles available to rent and lower demand after a recent price increase.

Redbox's decline is substantially larger than the 8% drop in DVD and Blu-ray disc rentals and 12% drop in sales that the Digital Entertainment Group, an industry trade group, reported for 2015. Overall home entertainment revenue fell 6% in the U.S. last year, as digital sales only partially made up for declines in physical media and online rentals.

Not long ago, Redbox was seen as a dire threat in Hollywood, drawing consumers to its inexpensive $1-a-night DVD rentals at kiosks that proliferated at grocery stores and other retail locations.

But as more people switch to digital streaming and download options, Redbox has struggled to find a way into that business. A short-lived joint venture with Verizon Communications Inc. launched in 2012 and shut down in 2014 after it failed to attract many consumers.

In December, former Warner Bros. executive Mark Horak left his post as Redbox president after less than two years on the job, during which he unsuccessfully tried to transition the company to a digital strategy. Outerwall Chief Executive Erik Prusch is serving as interim president of Redbox.

In a statement, Mr. Prusch said Outerwall will manage Redbox "for profitability and cash flow, and we will continue our focus on expense management, operational efficiencies and network optimization."

The company plans to remove between 1,000 and 2,000 Redbox kiosks this year. It had 40,480 at the end of last year.

Outerwall stock closed at $32.69 Wednesday before financial results were released.

Write to Ben Fritz at ben.fritz@wsj.com

(END) Dow Jones Newswires

February 04, 2016 18:45 ET (23:45 GMT)

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