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Redbox CEO on building a 'one-stop-shop for entertainment'

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Redbox CEO, Galen Smith, joins Yahoo Finance to discuss the entertainment platform going public in a SPAC deal and its plans to enter the streaming space.

Video Transcript

BRIAN SOZZI: Home entertainment platform Redbox says this week it's going public in a SPAC deal that values the company at $693 million. Redbox, owned by Apollo Global Management, which acquired it through the purchase of Outer Wall in September 2016. Today, Redbox says it has more than 40,000 DVD rental kiosks in operation. It is making a push into the streaming space.

Joining us now is Redbox CEO Galen Smith. Galen, good to see you this morning here. Listen, all week, we've been talking about the rise of streaming, the ongoing surge and streaming off of that AT&T Discovery deal. My question to you is, who is the core customer driving and going up to one of those traditional Redbox locations?

GALEN SMITH: Yeah, thanks for having us. This is a really exciting time for us. You know, we serve a very differentiated, kind of underserved, loyal customer. It's someone that really cares about value. So for $2 or less per night, the consumer can get the latest new theatrical releases at home, right? That's a third of the cost of a digital transaction.

And so, really, what we've been doing the last couple of years as we've been private have been building out our marketing assets, we've been building out our digital platform, and really giving the consumer more choice, right, moving from a single window DVD rental company to a multi-window, multi-channel ecosystem. And we're excited to continue to provide more choice to these value conscious consumers that shop at places like Walmart and Dollar Tree and Dollar General.

MYLES UDLAND: You know, Galen, before maybe we get into some of the transformation stuff, I'm just curious what the state of the DVD rental business looks like. Because I suspect that it's in better shape than I think all of us hipsters with our cutting the cord would maybe otherwise believe.

GALEN SMITH: Yeah, if you think about the opportunity with the physical DVD, right, again, it is that great value proposition, right? It's the cheapest way to get those new release movies. And so it's really robust. And we believe that it will continue to have a very long tail. According to IBISWorld, 2023 DVD rental in the US, it's supposed to be $1.1 billion, right? So, again, we provide a lot of those to consumers, but we think we've got, again, this opportunity to continue to have this really long tail in space.

JULIE HYMAN: So, Galen, it's Julie here. If that's the case, why mess with streaming, which is already such a crowded market, if you already have this really solid DVD business that you say is going to last for a while?

GALEN SMITH: We think it's an opportunity to provide the consumer more choice, right? Our consumers have been [INAUDIBLE]. We've been around for almost 20 years now. And by able to provide them this additional choice, right, it creates this additional value for them.

So, for instance, in 2017, we launched a digital transactional service, right? So if they want to stay home, they can watch that new release directly from us. In addition, in 2020, we launched Redbox Free Live TV. And so we continue to be able to provide additional value to them. And the fact that we have 39 million members in our loyalty program, it was 5 million in 2016 when we went private. Right, it's really that opportunity that we have to continue to provide this value to consumers.

And we think with all of the consolidation of what's happening in media overall, right, you think about providing simplicity to the consumer, right? Consumers find it very challenging to go to all these different services and all these different apps. What we're building and where we're going is providing a one-stop-shop for entertainment where they can get it transactionally through the DVD, through a kiosk.

You can go and get it digitally transactionally through our app. Or you can watch Free Live TV. Or you can subscribe to one of the other services. So we think about all those players that are out there and how we can be constructive and helpful to helping them drive more subscribers to our base, right, that they don't connect with today. And we're able to help reduce churn, as that's important to them as well.

BRIAN SOZZI: Galen, what has being owned by a private equity company, what has that allowed you to do?

GALEN SMITH: It's really allowed us to invest behind the scenes. Apollo has been a fantastic partner to us. It's allowed us to invest in the business. It's allowed us to invest for the long term. And we want to continue to do that as we come to the public markets. And so, we think that we're really well positioned to be successful, again, with this customer base that we serve better than anyone else.

BRIAN SOZZI: You know, just going through the investor presentation, Galen, you're looking to more than double sales this year, and looking out to 2023, more than double operating profits. What's the one biggest thing that will get you there?

GALEN SMITH: The biggest thing is the return of new release movies, right? Obviously, with exhibitors closed and studios holding back movies until there was a return to normality, it reduced the number of new movies. And that's going to be very beneficial both to our legacy kiosk business, but also to our digital transactional business.

And then we're going to continue to ramp. We've started doing Redbox Entertainment titles, these exclusive titles that we do. And we're able to monetize and not only across our platform, but also across everyone else, right? So you'll be able to rent a Redbox Entertainment titles at Amazon or iTunes or watch it streaming on Hulu. And so those will also drive some of that important growth over the couple of years to come.