If you think you’ve heard a similar story before, you wouldn’t be mistaken. Netflix (NASDAQ:NFLX) just made a major blow to it’s business by raising their video streaming prices and trying to break off their DVD delivery business. Now parent company Coinstar Inc (NASDAQ:CSTR) has decided it will raise the cost to rent a Redbox DVD by 20% putting the rental price at $1.20. To many Redbox raising prices doesn’t seem to be the best move after Netflix’s stumble.
What may be a little puzzling to some is that Coinstar Inc. saw their earnings in the third-quarter shoot up 90% on a strong rental business. This is the first time that Redbox has raised prices in eight years since they started sprinkling across the country. On top of increasing earnings, the CEO of Coinstar said that for the first time Redbox topped Netflix with 34.7% of units and has grown that by over 10% from last year.
One potential reason for the price rise you’ll find at a Redbox near you starting on Monday October 31st, 2011 is due to something called the Durbin Amendment that was created this last year. The Durbin Amendment was apart of the Fed’s Dodd-Frank Actwhich imposes new interchange rate increases which effect the business profitability of Redbox. Redbox’s parent company has decided to pass the cost on to the consumer.